This Top Analyst Chooses Yelp Inc (YELP) as #1 Small Cap Long Pick for 2017


Mark Mahaney at RBC Capital, one of Wall Street’s best-performing analysts, is singing the praises of Yelp Inc (NYSE:YELP) after conducting his third annual survey of the customer review platform’s consumers, touching base with over 2,800 respondents. The results? The analyst sees YELP entering 2017 in an excellent position and remains firmly bullish on the stock’s prospects.

The survey proved positive for YELP, particularly offering “a deep dive” into the platform’s new Request a Quote (RAQ) functionality that allows consumers to request quotes for jobs and services from services providers in an efficient way. For Mahaney, this is a massive opportunity for YELP, as he asserts, “Based on our own product testing, our consumer survey work, and a recent meeting with YELP management and the RAQ product team, we believe RAQ has significant long-term P&L potential for YELP.”

Additionally, the survey reveals that the platform’s usage has seen a rise from 37% of U.S. ‘Net users’ in 2014 to 65% this year. Moreover, the analyst notes, “The perceived usefulness of Yelp is rising,” which works to the company’s advantage, as users who deem the platform’s reviews to be useful and accurate “contribute to them more,” which “signals rising engagement.”

The only takeaway from the survey that is not as favorable for the company is that when it comes to the company’s competitive edge, results prove to be “mixed,” with Alphabet taking the lead when it comes to a tried and true site for consumers to look for merchant reviews.

However, fourth-quarter traffic data indicates better engagement for the company with App Annie data showing “very strong consistency” when assessing YELP’s Mobile download rankings.

Overall, “We still see in Yelp a strong and improving Local solution, one that is morphing from a Local Marketing Platform to a Local Marketing and Transactions Platform, which means that the strategic value of Yelp is rising. And we still view Yelp as facing an underpenetrated market opportunity (only 4% penetrated in mature markets). YELP also screens well as one of the SMID ’Net stocks with the greatest potential for EPS upside vs. Street in ’17, as one of the few ’Net stocks with Revenue Growth Acceleration and Margin Expansion in ’17, and with highly reasonable valuation,” Mahaney concludes.

Therefore, on back of the consumer survey’s encouraging results, the analyst reiterates an Outperform rating on shares of YELP with a $55 price target, which represents a just under 48% increase from current levels.

Mark Mahaney has a stand-out TipRanks score with a 69% success rate and has achieved a high ranking of #5 out of 4,291 analysts. Mahaney realizes 20.3% in his annual returns. When recommending YELP, Mahaney yields 16.7% in average profits on the stock.

TipRanks analytics exhibit YELP as a Buy. Out of 15 analysts polled by TipRanks in the last 3 months, 10 are bullish on YELP, 4 remain sidelined, and 1 is bearish on the stock. With a return potential of nearly 20%, the stock’s consensus target price stands at $44.54.