Yelp Inc. (NYSE:YELP) has posted their earnings for Q4 2019.
Revenue was $269M which missed analysts’ estimates of $272.01M
EPS was $0.24 which missed analysts’ estimates of $0.26
The stock has been dead in the water for the past 5 years, basically getting nowhere and fluctuating frequently in the $30-$50 range. For the past 1 year it has declined to its current levels of around $34 per share from about $40 per share (down ~17%). This is terrible performance considering the stock market as a whole has been hitting all time high after all time high in the past 5 years. The stock, which like the company that it represents, is struggling to stay relevant in 2020.
It’s Hard To Believe, But Yelp Used To Be Cool
The Yelp app first came to the iPhone in December 2008 to much fanfare. It was right around the introduction of Apple’s new iPhone 3G which finally enabled third-party apps. Yelp was frequently and prominently featured on Apple’s App Store homepage as part of Apple’s “There’s an App for That” campaign.
Yelp was promoted as the one review app to rule them all and for a while it lived up to its hype. Google and Yahoo! both tried to buy Yelp in 2009, with Yahoo! offering as much as a reported $1B, however the deal ended up falling through.
Since then, it is safe to say that things have changed. Google have since then built their own review platform which slowly began to steal the thunder from Yelp. Other big names like TripAdvisor and FourSquare came onto the scene as well.
It didn’t help that Yelp became increasingly embroiled in controversy. In a 2014 study conducted by two professors from Harvard and Boston University found that up to 20% of reviews on Yelp were fake.
Yelp has also been accused of using extortion tactics where salespeople from Yelp would pressure small businesses into paying a monthly fee in exchange for the suppression or removal of negative reviews. Reports say that businesses are being charged as much as $300 per month for a minimum 12-month commitment for these “services”. The news of this has certainly hurt Yelp’s reputation as people begin to wonder whether the management team is more interested in running a tech company or a mafia.
A quick Google search for “is Yelp…” gives suggestions like “is Yelp still relevant in 2019?” or “is Yelp dying?”
Expectations Are Low For Yelp
The quarterly estimate for EPS for this quarter was $0.26 per share, which represents a year-over-year change of -50.9%.
Source: ycharts.com
Looking from a forward P/E perspective, the valuation on Yelp is rather low, especially for a tech company. This shows that Wall Street is of the opinion that this stock is dud unless the company can really do something dramatic to turn the ship around.
Even despite the low valuation, it’s hard to justify why anyone should be buying this stock. The company seems to be completely stagnating and there’s so many other higher growth companies that investors could put their money into.
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