Yelp Inc. (NYSE: YELP) Stock Bullish Forecast
“In 2018, we are focused on increasing consumer usage through deepening our product experience in the Restaurants category and attracting advertisers through expanding sales channels and increased ad product flexibility.”
Jeremy Stoppelman, Yelp’s Co-Founder and Chief Executive Officer-
By Yelp, Inc. from Wikimedia Commons
Summary
- Business outlook for Q1 and for 2018
- Valuation Analysis
- About Yelp
During the year of 2017 Yelp experienced ups and downs and still managed to improve its financial positions. With Net revenue of $846.8 million and Advertising revenue of $771.6 million representing 19% and 20% growth in comparison to 2016, Yelp is expected to continue growing in 2018.
On February 6th, 2018 Yelp released a full Local Economic Outlook report that states Yelp’s health analysis on the restaurant industry. Findings of Yelp’s restaurant industry analysis point to a major shift in consumer perception of restaurants.
Yelp is putting its massive data stores to work identifying the parts of the country and types of business with the highest rate of growth. The Yelp data science team is continually working to identify the best measure of local economic health. Yelp highlights the rate of change in the number of businesses in a city, neighborhood, or business category as a way to equally weight business closures (a sign of economic challenges) and business openings, a sign of business investment and dynamism.
“Entrepreneurs are investing in opening businesses throughout the southeast and southwest, buoyed by booming populations and economies,” Yelp data science editor Carl Bialik said. “The engine of local economies is local business, and a growing business population is a strong sign of economic health.”
In addition, on March 19th, 2018 Yelp held a press release to announced that they completed online ordering integration with Grubhub restaurants. This gives YELP the Opportunity to now discover tens of thousands of new options for delivery and supports Yelp’s growth for 2018. Yelp users will be able to order from far more local restaurants, while taking advantage of Grubhub’s overall lowest-cost delivery.
First Quarter and Full Year 2018 Business Outlook
As of today, Yelp is providing its outlook for the first quarter and the full year of 2018. The outlook reflects the sale of Eat24, which was completed on October 10, 2017:
| $ and shares in millions | First Quarter 2018 | Full Year 2018 | ||
| Net Revenue* | $218 – $221 | $935 – $965 | ||
| Adjusted EBITDA | $29 – $32 | $175 – $187 | ||
| Stock-Based Compensation | $26 – $27 | $112 – $116 | ||
| Depreciation and Amortization as % of Net Revenue | ~5% | ~5% | ||
| Fully Diluted Share Count | 90 – 91 | 91 – 93 |
CFO Lanny Baker said: “We increased operating income in 2017, while achieving strong topline results aided by customer success initiatives. Looking to 2018, we plan to provide businesses greater control over their advertising messages and increased flexibility in contract term lengths. We are also focused on strengthening our competitive position in the highly-trafficked Restaurants category, and as a result, expect to incur operating losses of $20-$25 million related to Nowait, Yelp Reservations and Yelp Wi-Fi collectively in 2018 as we invest in their growth.”
Valuation analysis
Yelp is expected to improve its performance in 2018, after the risky strategies which the company followed last year in respect M&A investments giving sometimes increase in value. On 7th February the company released its financial statements and highlights to the public. Most of the indicators were improved over the last year and especially during the last quarter. Although, the company missed the forecasted bottom-line for revenue at $220 million with the reported revenue of $218 million, the announcement earnings of 19 cents per share topped the estimation of 5 cents per share.
In the chart above one can see that the company managed to satisfy the market needs and stayed in trend most of last year.
The company’s stock is excepted to grow starting April, since it is above the market by 25%, according to the chart. Looking at the company’s most recent performance moves we see that recent movement are telling different stories about price movement in different time periods. In the past month, the value of the company went down, as showed, about 10% drop. Although, going forward to 3 months ahead or even to year-to-date I assume that the company’s value will rise and increase its performance. I believe that the company is implying strategy changes to increase value for the long term based on the price hike in April 2018.
Above, is Yelp’s profitability performances of TTM (%) VS. 5-year Average (%). As presented, one can see, that the company’s profits grew in the latest 12 months trailing compared to the 5-year average analysis. Net profit increased by about 15%, Operating Margin increased by about 10% etc. I see these profitable performances as another strong position to the company’s improvements of 2018.
Analyst Recommendation
According to analyst recommendations from Yahoo Finance, the current consensus is a “Buy” in Yelp Stock, with 4 advising a “Buy”, and 11 advising a “Hold”.
Technical analysis is a method that applies to take a guess of future price trends through analyzing market action. The main idea of technical analysis is that history tends to repeat itself. After doing a technical check on the stock price movement in comparison to its moving averages (20, 50 and 200 SMA) I observed a few trends of Yelp that are based on trading activity. The strength of Yelp’s trading activity is that it manages to stay above the market value most of the time. The company’s value has many ups and downs that present short term, intermediate and long term technical levels of Yelp Inc. stock.
I Know First addressed the question of whether Yelp will be able to demonstrate the same and improved performance as its officers announced for the year of 2018 with an Algorithmic Bullish Forecast for Yelp.
Past I Know First forecast success with Yelp
On February 7, 2018, I Know First Algorithm predicted the stock movement for Yelp. The forecast showed a bullish signal of 65.70 and a predictability of 0.52 for 3-months and is achieving its growth prediction.
In a good agreement with the forecast Yelp is with more than 10% gain since this bullish forecast.
I Know First Algorithm Heat-map Explanation
This indicator represents the predicted movement direction/trend. The signal strength indicates how much the current price deviates from what the system considers a balance or “fair” price.
The signal strength is the absolute value of the current prediction of the system. The signal can have a positive (increase), or negative (drop) sign. The heat map is arranged according to the signal strength with strongest up signals at the top. The table colors are indicative of the signal. Green indicates to the positive signal and red indicates a negative signal. A deeper color means a stronger signal and a lighter color equals a weaker signal. The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.
Predictability measures the importance of the signal. The predictability is the historical relationship between the prediction and the actual market movement for that particular market. For each asset this indicator is recalculated daily. Theoretically the predictability ranges from minus one to plus one. The higher this number is the more predictable the particular asset is. In comparison to different time ranges, predictability will be higher for longer time. This means that longer-range signals are more accurate.
Predictability is a unique indicator of the I Know First algorithm which allows users to focus on the most predictable assets according to the algorithm. One should focus on predictability levels significantly above 0 in order to trust the signal, when ranging between -1 and 1.
About Yelp
Yelp Inc. (NYSE: YELP) helps people find great local businesses like dentists, hair stylists, and mechanics. Yelp was founded in San Francisco in July 2004. Since then, Yelp has taken root in major metros in more than 30 countries. Approximately 29 million unique devices accessed Yelp via the Yelp app, approximately 77 million unique visitors visited Yelp via desktop computer and approximately 64 million unique visitors visited Yelp via mobile website on a monthly average basis during the fourth quarter of 2017. By the end of the same quarter, Yelpers had written approximately 148 million rich, local reviews, making Yelp the leading local guide for real word-of-mouth on everything from boutiques and mechanics to restaurants and dentists.
