Yelp (YELP) Target Trimmed to $86 at RBC Capital; Bullish View Maintained
RBC Capital analyst Mark Mahaney trimmed his price target on Yelp (NYSE: YELP) to $86.00 (from $88.00) following Q3 results but maintained an Outperform rating.
Mahaney commented, "YELP traded off 15% in the after-market, not illogical given the print. When companies lower their guidance with little explanation or acknowledgment—guidance implies material deceleration in a key Revenue segment - it’s tempting to shoot first (downgrade) and ask questions later. But we believe our Long Thesis is still intact. We doubt YELP is closing in on its TAM and thus not maturing out its growth, and we’re skeptical there’s a market share issue. We believe it’s a solvable salesforce execution issue. Our Long Thesis: YELP is a top-of-funnel, strong-brand unique asset with downstream transaction capability (like TRIP and GOOG). We continue to see strong growth in its oldest cohorts as a convincing sign of the durability of future growth rates. We still identify at least two growth gap-up scenarios: 1) Yelp’s younger cohort markets (e.g., 2009–2010) are generating revenue dramatically below the level of Yelp’s older cohort markets (e.g., 2005–2008), as much as 14x gap; and 2) while its Int’l markets generate 23% of the total traffic, they generate only 3% of total revenue. And strategically, we continue to believe YELP would be a logical fit for at least a half-dozen Large Cap ’Net companies."
’15 Rev reduced 2% to $551MM, but EBITDA increases 4% to $127MM.
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Shares of Yelp closed at $70.23 yesterday.