Deutsche Bank Upgrades Yelp (YELP) to Buy

Deutsche Bank upgraded Yelp (NYSE: YELP) from Hold to Buy with a price target of $33.00 (from $26.00). Analyst Lloyd Walmsley sees upside to estimates and is more comfortable with management.

"We upgrade shares of Yelp from Hold to Buy and increase our TP from $26 to $33, reflecting stabilized salesforce productivity, more confidence in management, and improvements in ad units and systems bolstering our longterm outlook. We increase 2016 estimates to the high end of the guide, and see further upside potential in our Bull case. Beyond 2016, challenges remain, but we prefer to be long the shares for upside this year and better long-term optionality given increased confidence that new financial leadership at Yelp can help drive product and monetization innovation in 2017 and beyond," said Walmsley.

"We see considerable upside (on top of today’s estimate increases) in our bull case if Yelp can continue to build on improving salesforce efficiency and sustain 1Q levels of ad fulfillment. If ARPU growth from 1Q continues at +5% Y/Y for the balance of the year, Yelp could reach the high end of guidance adding 12% fewer net new LAAs than the same period in 2015. In our bull case (Figure 13), if Yelp sustains 1Q levels of salesforce productivity and ad budget fulfillment, we see $93M of revenue upside to $975M from our current 2017 estimate (vs consensus of $872M) and $28M in 2017 EBITDA upside to $170M (vs current DB estimate & consensus of $142M), worth another ~$5/share in value potentially," added the analyst.

For an analyst ratings summary and ratings history on Yelp click here. For more ratings news on Yelp click here.

Shares of Yelp closed at $26.92 yesterday.

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