YELP - Yelp stock rises after Goldman upgrades on more positive risk/reward

2023-07-17 08:41:00 ET

Goldman Sachs upgraded Yelp ( NYSE: YELP ) to Buy from Neutral and raised raised its 12-months price target on the stock to $47 from $38 as the firm sees a more positive risk/reward skew at current levels.

Goldman analysts noted that based on their advertising industry work, they are becoming more positive on Yelp's ability to maintain ~M-HSD % revenue growth in '24-'27E through a combination of — a broadly stable-to-improving local advertising environment; company's recent investments in its ad tech stack (better measurement/attribution, improved matching algorithm and budget optimization, etc.) steering sustained ad price inflation; and continued enhancement of newer initiatives (such as YELP Audiences) driving better auction density and a more diversified revenue base over time.

The analysts also see the potential for steady margin expansion over the next five years as revenue growth is generated at high incremental margins via a combination of high-margin CPM/CPC inflation and limited opex growth driving operating leverage.

In addition, the analysts noted that while they only include Yelp's existing authorization in their modeling, they see potential upside optionality to their current guidance from continued shareholder returns (in the form of stock buybacks).

Despite Yelp's stock having risen +38% year-to-date (and +36% since the company's  Q1 earnings report), shares are still only trading at ~9x GSe '24 GAAP EBITDA and ~15x P/E ex-cash the firm's '25 GAAP EPS estimates, according to the analysts.

YELP +4.09% to $39.69 premarket July 17

More on Yelp

• Yelp Quant Rating
• Yelp: Growth At A Reasonable Price With Catalysts, 30% Upside
• Yelp: Momentum Is Picking Up Steam

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