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Q3 Earnings Preview for Yelp (NYSE:YELP)

in EARNINGS/INVESTING IDEAS by

Yelp Inc. (NYSE:YELP) is scheduled to report Q3 earnings results after markets close for trading on November 5, 2020.

The company is expected to report earnings of $0.02/share on revenue of $200.7 million. The consensus earnings per share (EPS) of $0.02/share is based on a poll of 13 analysts and represents a decline in eps of −95.9% over the same quarter last year, when the company reported earnings of $0.53/share.

The revenue forecast of $200.7 million based on a poll of 17 analysts implies a year-over-year (YoY) decline in revenue of −23.5%. Last year the company reported $262.5 million in revenue for the quarter.

Expected to report EPS contraction of −95.9% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $200.71 $262.47 −23.5%
EPS $0.02 $0.53 −95.9%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and missed expectations 1 quarter.

What are your expectations from Yelp Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$0.18 -$0.01 94.9% Beat
Q1, 2020 $0.22 $0.23 2.1% Beat
Q4, 2019 $0.60 $0.59 −2.1% Missed
Q3, 2019 $0.50 $0.53 6.0% Beat
Q2, 2019 $0.40 $0.45 12.0% Beat
Q1, 2019 $0.28 $0.38 35.1% Beat
Q4, 2018 $0.36 $0.70 93.3% Beat
Q3, 2018 $0.35 $0.50 40.4% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −17.7%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 6, 2020 $26.64 $21.92 −17.7% Decline
May 7, 2020 $22.12 $23.45 6.0% Increase
February 13, 2020 $35.36 $35.23 −0.4% Decline
November 7, 2019 $32.71 $34.77 6.3% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.56, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.56 implies a 0.0% chance of earnings manipulation.

Fundamentals And Technical Analysis

Yelp Inc. is currently trading at $19.67/share, up 0.2% for the day. The company is trading at approximately 52.5% of its 52-week high of $37.49/share. The company’s stock price is down −10.3% since the last earnings report and down −6.2% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 43.55 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:YELP Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −117.14 and a forward P/E multiple of 35.39.

Yelp Inc.’s current share price also implies a price-to-book (P/B) multiple of 1.84. The following table summarizes some other key fundamental ratios:

Data as of November 1, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $19.67
P/E Ratio −117.1x
P/E Ratio (Fwd) 35.4x
PEG Ratio 0.9
Total Debt / Total Capital 13.3%
Levered Free Cash Flow $128.9 million
EV / EBITDA −185.5x

Finbox

Yelp Inc. is a small-cap stock with a market capitalization of $1.439 billion and a total enterprise value of $1.134 billion. The company operates in the Communication Services sector and the Interactive Media & Services industry.

Yelp Inc. operates a platform that connects consumers with local businesses in the United States, Canada, and internationally. The company’s platform covers various local business categories, including restaurants, shopping, home and local services, beauty and fitness, health, and other categories. It provides free and paid advertising products to businesses, as well as enables businesses to deliver targeted search advertising to local audiences through its Website and mobile application; and business listing products. The company’s Yelp platform enables consumers to order flowers, purchase event tickets, and book spa and salon appointments. In addition, it offers Yelp Deals that allow local business owners to create promotional discounted deals for their products and services; and Gift Certificates. Further, the company provides other services comprising Yelp Reservations that provide restaurants, nightlife, and other venues with the ability to offer online reservations directly from their Yelp business listing pages; Yelp Waitlist, a subscription-based waitlist management solution that allows consumers to check wait times and join waitlists remotely, as well as businesses to manage seating and server rotation; and Yelp Knowledge program that offers business owners local analytics and insights through access to its historical data and other proprietary content. Additionally, it provides content licensing, as well as allows third-party data providers to update and manage business listing information on behalf of businesses. The company offers its products directly through its sales force; indirectly through partners; and online through its Website, as well as non-advertising partner arrangements. It has strategic partnership with Grubhub for providing consumers with a selection of restaurants and delivery options. Yelp Inc. was founded in 2004 and is headquartered in San Francisco, California.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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