Photo Credit: Yelp Inc.

Yelp, Inc. (YELP) Information Technology - Internet, Software & Services | Reports May 5, After Market Closes

Key Takeaways

• The Estimize consensus is calling for a loss of 16 cents per share on $155.76 million in revenue, reflecting a 624% decline on the bottom line and 31 increase on the top
• Facebook’s new services platform poses a huge threat to Yelp which is already beginning to see a decline in web traffic
• Morgan Stanley estimates that roughly 50% of Yelp’s current ad-buyers will not purchase ad units in the next 12-months
• What are you expecting for YELP? Get your estimate in here!

Yelp is the foremost trusted platform for restaurant and business reviews but has failed to gain traction in the investment world. In spite of robust revenue growth in the past years, shares are down 45.7%. Investors have been unimpressed with continual losses on the bottom line and weak quarterly guidance. Meanwhile, sales growth has begun to decelerate and even a 40% increase last quarter, fell short of where Yelp was a year earlier. This quarter is expected to be no different. The Estimize consensus is calling for a loss of 16 cents per share on $155.76 million in revenue, reflecting a 624% decline on the bottom line and 31 increase on the top. Since January, per share estimates have dropped 295% from 10 cents. Yelp is plagued with many problems that have hurt profitability, but its biggest has to be the huge drop in user traffic they’ve seen over the past year. 

Since the launch of Facebook’s Services platform, Yelp shares have fallen 22%. While Yelp is still the most highly used platform for crowdsourced business reviews, Facebook’s review system eliminates internet anonymity typically associated with a Yelp rating. Moreover, Yelp faces diminishing web traffic which doesn’t bode well for ad revenue, partially due to the separation from key partner, OpenTable. Yelp generates a majority of its traffic from two main engines: its mobile app and Google. While the mobile app has performed remarkably well so far, its presence in Google and other search engines have declined. To remedy this issue, Yelp intends to increase marketing investments to $50 million in 2016, from $30 million last year which will hopefully help offset churn rates. Morgan Stanley estimates that roughly 50% of Yelp’s current ad-buyers will not purchase ad units in the next 12-months.