Aegis Initiates a Buy on Yelp Inc (YELP); Sees 34% Upside for the Stock


Top analyst Victor Anthony of research firm Aegis came out today with a Bullish call on shares of Yelp Inc (NYSE:YELP). The analyst initiated coverage on YELP with a Buy rating and a price target of $47, which represents a potential upside of almost 34% from where the stock is currently trading.

The analyst believes, “Following an extremely challenging 2015 (co. missed our estimates in all four quarters), Yelp has outperformed our estimates for three consecutive quarters and management raised full year 2016 revenue and Adj. EBITDA guidance three times this year. Local advertising revenue growth accelerated for three consecutive quarters, margins have expanded (50% incremental margins in 3Q16), and Yelp is finding new product opportunities to drive growth and expand margins. Recent concerns regarding traffic growth, Google policy changes, and management comments about balancing margins, revenue, and cashflow are overblown.”

“While national accounts have been growing in-line with the core local advertising business, national accounts have higher revenue yields per account, have higher margins, and have higher retention rates. Yelp’s self-serve channel is a very high-margin revenue stream that grew more than 100% YoY in 3Q16, accelerating from 2Q16,” Anthony surmises.

With revenues set to rise by approximately 30% this year and margins steamrolling to grow by 390 basis points, the analyst anticipates revenues to accelerate at a 20% CAGR and adjusted EBITDA to grow at a 37% CAGR from the span of 2016 to 2019, with adjusted EBITDA margins on a close to 800 basis points expansion from a projected 16.4% in 2016 to 24.2% come 2019. As Yelp’s objective for 2017 for fluid functionality over monetization comes into play, which Anthony believes will most likely be a goal that hits its stride in 2018, the customer review platform should see upside to the stock.

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star analyst Victor Anthony has achieved a high ranking of #62 out of 4,269 analysts. Anthony upholds a 65% success rate and realizes 13.2% in his annual returns. However, when recommending YELP, Anthony loses 4.5% in average profits on the stock.

TipRanks analytics demonstrate YELP as a Buy. Based on 15 analysts polled in the last 3 months, 10 rate a Buy on YELP, 4 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $44.54, marking a nearly 27% upside from where the shares last closed.