Yelp: Another Miss

Yelp’s (NYSE:YELP) strong prospects are quickly deteriorating. The company reported earnings of just $0.02 as revenue grew 5.8% to $236 million. The miss from consensus is the third consecutive one in a row. What is wrong with the business?

Yelp reported adjusted EBITDA of $39 million and net income of $1 million. In the first quarter presentation, the company outlined its pillars for the next phase of growth. It will increase its focus on advertisers and business owners. It will integrate its product and product marketing with its sales efforts. And for the long-term, it will establish growth, profit, and capital return targets.

2019 – 2023 Targets

In the last decade, revenue grew 55% CAGR. And although the five-year CAGR from 2013-2108 slowed to 32%, Yelp aims to capture more of the $150 billion local advertising budget. Of the 20 million business locations in the U.S., Yelp has 4.5 million active claimed businesses.

From 2019-2023, Yelp aims to deliver CAGR revenue growth in the mid-teens. If it wins key verticals like home services, expands its offerings and offers more tools for its business customers. By enhancing tools to increase the customer monetization efforts, Yelp may start showing improvements in its business.

Yelp is profitable and has a healthy balance sheet. Its $700-million total share buyback consists of $250 million to be completed in 1H/2019.

The stock is expensive at these levels so consider waiting for shares to bottom before starting any position.