Yelp Inc. YELP was up over 5% yesterday after a report from Needham & Company reaffirmed the analyst’s bullish view on the company, citing its efforts to boost sales, headcount and advertising as key growth drivers.
The analyst stressed that Yelp’s business will likely be driven by its measures to develop more innovative products like Request a Quote and Eat24, which will not only allow the company to improve its sales productivity but also lead to improved customer retention. Furthermore, the ongoing transition to cost-per-click (CPC) pricing bodes well for the company, thereby allowing it to evolve to being a more transactional business, said the report.
But this is not all. Earlier this week, even Deutsche Bank AG DB had upgraded Yelp saying "We upgrade shares of Yelp (on) stabilized sales force productivity; more confidence in management with Lanny Baker on board as CFO, and improvements in ad units and systems which should drive sustained ARPU (average revenue per user) growth in 2016." Baker had taken the company’s helm last month.
Yelp, which features user-generated reviews of local businesses, now remains focused on key areas like customer engagement, local advertising and its transactional business.
While the company is yet to report profits, the new management team and improvement in some key metrics in the last reported quarter boosted investors’ confidence. Despite missing earnings expectations, Yelp fared much better in terms of revenues, especially when it came to local ad revenue. Apart from this, the company also reported a nice jump in app unique devices indicating strength in its business.
Since its first quarter earnings release on May 5, Yelp shares have gained nearly 39% in contrast to the S&P 500 index’s return of about 3%.
Nonetheless, investors need to watch out for increasing competition from players like Uber, GrubHub GRUB, OpenTable and Amazon AMZN and even major tech companies like Google and Facebook among others.
Yelp is a Zacks Rank #3 (Hold) stock.
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