Yahoo Finance Yelp Inc. (NYSE:YELP) Released Earnings Last Week And Analysts Lifted Their Price Target To US$36.75
It's been a good week for Yelp Inc. (NYSE:YELP) shareholders, because the company has just released its latest annual results, and the shares gained 8.8% to US$37.91. It looks like the results were pretty good overall. While revenues of US$873m were in line with analyst predictions, statutory losses were much smaller than expected, with Yelp losing US$0.27 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Check out our latest analysis for Yelp
Taking into account the latest results, the current consensus from Yelp's 16 analysts is for revenues of US$998.5m in 2021, which would reflect a decent 14% increase on its sales over the past 12 months. Statutory losses are expected to reduce, shrinking 17% from last year to US$0.31. Before this earnings report, the analysts had been forecasting revenues of US$980.2m and earnings per share (EPS) of US$0.043 in 2021. So despite reconfirming their revenue estimates, the analysts are now forecasting a loss instead of a profit, which looks like a definite drop in sentiment following the latest results.
Although the analysts are now forecasting higher losses, the average price target rose 23% to US$29.94, which could indicate that these losses are expected to be "one-off", or are not anticipated to have a longer-term impact on the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Yelp at US$45.00 per share, while the most bearish prices it at US$26.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Yelp's past performance and to peers in the same industry. It's clear from the latest estimates that Yelp's rate of growth is expected to accelerate meaningfully, with the forecast 14% revenue growth noticeably faster than its historical growth of 9.5%p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 15% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Yelp is expected to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing to take away is that the analysts are expecting Yelp to become unprofitable next year. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on Yelp. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Yelp analysts - going out to 2025, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 3 warning signs for Yelp that you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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