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“As the economic activity picks up, we do see fairly correlative recovery alongside that,” Yelp Chief Executive Jeremy Stoppelman said on the company’s earnings call Thursday.
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The beginning of a bounce back for local businesses is benefitting Yelp Inc., which easily topped earnings and revenue expectations for its September quarter.
“We are starting to see the impact of early signs of recovery and reopening of the economy on Yelp’s YELP, +8.76% business,” RBC Capital Markets analyst Shweta Khajuria wrote. “We continue to view Yelp as a ‘vaccine’ stock—with the release of a COVID vaccine, Yelp should benefit substantially in terms of foot traffic for businesses on its platform as well as its app traffic.”
Khajuria upgraded Yelp’s stock to outperform from sector perform following the report, and she has a $29 price target on the stock, which is up 8% in Friday trading.
She sees valuation upside for Yelp, which has declined 32% so far this year as the Nasdaq Composite Index COMP, +0.03% has gained 32%. Khajuria said Yelp’s pullback was “largely justified” given how the pandemic impacted revenue in the second quarter, but she now believes “the worst is behind Yelp.” She also sees signs of improving fundamentals.
Baird’s Colin Sebastian also likes the company’s positioning as the economy begins to recover.
“While there are still pandemic-related risks, Yelp is on stronger product footing and has a more productive salesforce,” he wrote. “Looking ahead, we believe investments to monetize Home & Local further and a larger multi-location sales team should help Yelp return to year-over-year growth by Q2.”
He rates the stock at neutral with a $26 target price.
Stifel’s John Egbert still sees a “multi-quarter recovery story” ahead for Yelp as its core advertising business is still operating below pre-pandemic levels.
“Although Yelp’s outlook is gradually improving, it has underperformed its digital media peers and the onset of colder weather/increasing COVID-19 cases in numerous regions could continue to weigh on key [small- and medium-sized business] verticals” through the fourth quarter of this year and the first quarter of next year.
Egbert said that the changing weather and the evolving COVID-19 situation create more limited visibility into what the next few quarters will bring. He has a hold rating on the stock, and he boosted his price target to $24 from $22.
At least four analysts raised their price targets on Yelp’s stock after the report, according to FactSet. The average target now stands at $25.38. Of the 20 analysts tracked by FactSet who cover Yelp’s stock, four have buy ratings, 13 have hold ratings, and three have sell ratings.
