RBC Capital Weighs In on Paypal Holdings Inc (PYPL) and Yelp Inc (YELP) Following 3Q:15 Results

Following recent earnings announcements, RBC Capital analysts weigh in on the online payment giant Paypal Holdings Inc (NASDAQ:PYPL) and customer review giant Yelp Inc (NYSE:YELP), with mixed ratings and views.

Paypal Holdings Inc

PayPal’s third-quarter earnings report was its first as a standalone company following its spin-off from eBay in July. The company reported solid results, with revenue missing consensus by less than 1% and EPS beating by 6%.

RBC Capital analyst Daniel Perlin commented: “In general, we believe that PayPal’s first stand-alone quarter (a) was relatively mixed in terms of results, with F/X impacting revenue and TPV growth but margins and EPS ahead, (b) supported our thesis that the company will continue to take market share in ecommerce as a “neutral” provider, and (c) highlighted the continued growth of Venmo, mobile, and credit products.”

“We are tweaking our CY15 EPS estimate slightly higher (one penny) to $1.27 and maintaining our CY16 EPS estimate at $1.53, and CY17E at $1.83. With the unchanged estimates, our price target remains $46, or ~30x our CY16 EPS estimate and in line with a comp group consisting of networks, merchant acquirers, and alternative finance providers.”

Perlin reiterated an Outperform rating on Paypal Holdings shares, with a price target of $46, which represents a potential upside of 28% from where the stock is currently trading.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Daniel Perlin has a total average return of 20.5% and a 83.3% success rate. Perlin is ranked #368 out of 3808 analysts.

Out of the 26 analysts polled by TipRanks in the last 3 months, 16 rate Yelp stock a Buy, 7 rate the stock a Hold and 3 recommend Sell. With a return potential of 15%, the stock’s consensus target price stands at $41.32.

Yelp Inc

Yelp reported financial results for third quarter of fiscal 2015 after yesterday’s close, posting revenue of $143.6 million, which came in slightly ahead of consensus estimate at 141.3 million and above guidance of $139-142 million. YELP shaved down its Q4 outlook but still bracketed the Street on both Revenue and EBITDA.

In reaction, RBC Capital analyst Mark Mahaney reiterated a Market Perform rating on shares of Yelp, while reducing the price target to $34 (from $36), which implies an upside of 48% from current levels.

Mahaney noted, “Local ad revenue growth decelerated to 36% Y/Y, from 43% in Q2, 51% in Q1 and 65% in ’14, and was below our forecast. Hard to see the stock working unless this stabilizes, and no way YELP can reach its goal of $1B in revenue by 2017 unless this segment (80% of total revenue) improves.” Furthermore, “Local cohort revenue trends decelerated with between 3 and 10pts of deceleration across all three cohorts.” Additionally, “Local advertising accounts growth stabilized 7,100 net adds vs. 7,500 in Q3:14 but 6,900 in Q2:15.” Finally, “Mobile Unique Visitor Growth Stabilized 22% Y/Y to 89MM, same growth as Q2.”

“If YELP can really meet its goal of $1B in revenue in 2017, this could be a great Long. But that goal requires a recovery in momentum for which there is little evidence. So lots of negatives here. But against them, we see strategic value to YELP and fundamental valuation (3X P/S and < 20X EV/EBITDA) that is undemanding,” the analyst concluded.

According to TipRanks.com, analyst Mark Mahaney has a total average return of 21.5% and a 65.2% success rate. Mahaney has a -28.4% average return when recommending YELP, and is ranked #4 out of 3808 analysts



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