Samantha Fischler is a Financial Analyst at I Know First.

Yelp Stock Predictions: Give a Yelp if you Want the Latest Stock Prediction

Summary

Yelp delivers stronger-than-expected second quarter earnings

Yelp invested $8 million in start-up app “Nowait”

Desktop site traffic has slowed for the company

Local ads revenue increased by 41% year-over-year

I Know First is currently bullish on YELP

Overview of the Company

Yelp Inc. (YELP) is a company that hosts yelp.com and the mobile app Yelp, which serve as crowd-sourcing review services for local businesses including restaurants, bars, and small shops. Yelp also hosts SeatMe, which is an online service that allows you to make restaurant reservations, and Eat24, an online food delivery service. The company was founded in 2004 and is currently headquartered in San Francisco, California. The company is led by co-founder and CEO Jeremy Stoppelman and CFO Lanny Baker. During its second quarter earnings call, the company announced that Jed Nachman, who has led the company’s sales team since joining Yelp in 2007, would be stepping up as COO.

Q2 Earnings

On August 9, 2016, Yelp released its earnings report for the second quarter of 2016, ended on June 30th. Year over year, Yelp experienced upwards of a 30% increase in cumulative reviews, ending Q2 with approximately 108 million cumulative reviews.

Yelp experienced an outstanding increase in revenue, up 30% this quarter to $173.4 million. Analysts had expected Yelp to grow to $169 million. For the third quarter, Yelp’s leadership is quite optimistic about continuing to grow its revenue stream. Yelp is anticipating a rise in revenue of 27% year-over-year, bringing the revenue for Q3 to anywhere between $180 to $184 million.

For five consecutive quarters, Yelp has reported losses. Analysts projected a loss of seven cents per share. Profits and EPS were areas where Yelp shocked the finance world. Yelp experienced an increase in one cent per share this past quarter and the company posted a profit of $449,000.

Following the release of the better than expected second quarter earnings, YELP jumped 14% in one day, hitting a new 52-week high. YELP’s share price was $36.83 at market’s close on August 10, up from the $32.54 that the company was trading for at closing at August 9, prior to the release of the company’s earnings report.

Experience NoWait to Hear about this Partnership

Yelp invested $8 million in Oakland based app Nowait. Nowait is an app that allows users to be added to a wait list for tables in restaurants and be notified by text when their table is ready. The app provides users with the opportunity to avoid waiting in crowded restaurant lobbies and allows them to make the most of their time. Nowait covers restaurants across the US from chains like Chili’s to local restaurants.

(Image Source: nowait.com)

The partnership between Yelp and Nowait is mutually beneficial. For Nowait, Yelp is a platform that will connect it to many more potential consumers. Nowait will now have access to the 23 million users of the Yelp app and give these Yelp users the ability to skip the lines at over 4,000 restaurants nationwide. Yelp on the other hand hopes to be able to integrate Nowait’s technology into its own services in the coming months, giving users another reason to use the Yelp app’s interactive interface to fulfill all of their dining needs.

Desktop or Mobile?

The world is transitioning to a place where people look for everything online. Instead of calling a travel agent, people might look for cheap flights or hotels via Priceline or Expedia. Want to listen to your own music? Few people will still pop in a CD over using a music-streaming service like Spotify. Directories have transitioned into websites like Yelp.com. Much of Yelp’s reach is provided through searches on search engines such as Google or Bing. Another large contributor to Yelp’s wide reach is clicks through its mobile app. In Q2, Yelp’s app was downloaded on 23 million unique devices, up 27% from Q2 of 2015.

A reason to perhaps be cautious with Yelp is that like many companies, the number of visits to its website via desktop computers is declining. According to Yelp, the number of unique users from desktop computers decreased from 77 million during the first quarter to 73 million in Q2. While site traffic from mobile devices is up 7% year-over-year, growth in site traffic from mobile devices has slowed. This is the slowest “mobile-traffic” growth that the company has experienced to date. However, Yelp’s mobile reach far surpasses the likes of TripAdvisor, Groupon, and YP Sites, to name a few.

Increase in Local Ads Revenue

Local advertising through Yelp has been an increasing enterprise for companies and the results certainly showed in Yelp’s second quarter earnings. The second quarter earnings report disclosed that Yelp’s revenue from local advertising has increased 41% since the second quarter of 2015. CEO Jeffery Stoppelman said “Our mission is to connect people with great local businesses and we did that through more than 300 million connections in the second quarter – which include mobile calls, clicks for map views and directions, food orders, restaurant reservations, and new reviews, among other actions.”

Conclusion

In a 1-month forecast dated July 12, I Know First’s algorithm indicated strong growth for YELP. On August 12, YELP had returned 29.04%, showing the accuracy and precision with which I Know First has recommended Yelp in the past.

In an age where the world is turning to the internet for just about everything, Yelp has potential to experience continued growth. Yelp’s success in the local advertising business as well as its partnership with Nowait will also contribute to bringing in large revenue streams going forward. I Know First maintains it’s bullish stance on YELP.