Facebook (FB) Seen as Leading Potential Acquirer for Yelp (YELP): Deutsche Bank
Deutsche Bank maintained a Buy rating on Yelp (NYSE: YELP) and raised its price target to $56.00 (from $51.00). The change reflects higher probability of a takeout and follows rumors it hired bankers to explore a potential sale. Analyst Lloyd Walmsley thinks Facebook (NASDAQ: FB) is the leading potential acquirer.
"We see a see a 60% probability that Yelp sells at between 6x to 9x 2016E revs, or $59 to $85 per share (25% to 81% upside). If no deal materializes, we see 32% downside to 3x revenue. We expect a lot of interest (local category winner, huge user base, global) and see Yelp going for a premium given a unique asset that is hard to replicate (user reviews/community). We reiterate our Buy rating and raise our TP to $56 (from $51) on our probability weighted framework. We believe Yelp could create far more shareholder value inside a larger Internet company that could better monetize its traffic with more advertiser relationships and better ad tech," said Walmsley.
"Yelp has a strong position in local, with 142M MAUs, 79M mobile MAUs, and 97M reviews. From a monetization perspective, however, Local is a very difficult space, and Yelp is reliant on a large tele-sales force. The company’s recent challenge has been attracting and retaining SMB advertisers. We see Facebook as a leading potential acquirer given its: 1) FB’s interest in Local, 2) a 2M strong advertiser base (vs. 90K for Yelp) and superior ad tech stack, 3) the ability to use Yelp reviews to improve mobile Graph Search, and 4) its industry leading product and engineering team. We believe there could be multiple parties interested in the asset. We note that eight parties were interested in OPEN, and three placed bids, suggesting interest for Local Internet assets," 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 $47.01 yesterday.