Earnings Beat: Snap Inc (SNAP) and Yelp Inc (YELP)

As the earnings dice roll, would you buy in on Snap Inc (NYSE:SNAP) and Yelp Inc (NYSE:YELP) or is the deck stacked against you? One of Wall Street’s best analysts from Aegis as well as Cantor chime in with varied takes. Aegis argues the bull case wins only if Snap outperforms on a revenue and daily active user growth double standpoint, cautious on Facebook’s Instagram Stories as a fierce competitor. Meanwhile, Cantor roots for Yelp’s long-term buying advantage in spite of investors scurrying towards the hills. Let’s take a closer look:

Can Snap’s Revenue and DAUs Bring Their A Game for the First Print?

Let the drum roll as Snap braces to sound off its first quarterly print as a publicly traded company once the bell tolls at the close. The way top analyst Victor Anthony at Aegis sees Snap’s hand of cards at play, the popular Snapchat app parent company, CEO Evan Spiegel will need a one-two outclass ace from revenues and daily active users “for the stock to work.”

The way Anthony’s crystal ball hangs in the balance, while revenue has odds to win on upside thanks to a surge in advertiser attention, DAU tracking does not look to bring in substantial upside. For the first ever public quarter for Snap, the analyst forecasts revenues of $159 million, just ahead of consensus of $158 million, and an adjusted EBITDA loss of $155 million compared to consensus projecting a loss of $181 million. Moreover, for North America, the analyst expects $136 million in revenues; for Europe, the analyst looks for $17.2 million, and ROW revenues of $6 million.

With regards to DAUs, the analyst projects 164 million, which would mark a 34% year-over-year rise and 6 million net additions, bringing North America to 70 million, Europe to 54 million, and ROW to 40 million DAUs. However, the analyst doubts the company will offer guidance at this time.

In Snap’s favor, the analyst highlights, “Since the IPO, Snap has launched self-serve ads, which should expand the number of advertisers on the platform, expanded Sponsored Geofilters through the Ads API, and is expanding its salesforce. Product updates such as the Stories search tool are resonating with users.”

Yes, Snap may be king among the millennials in the social media court, but Instagram still lingers as a “key risk factor for the business and the stock, given the ease it replicates Snap’s features,” notes the analyst, who finds “older age cohorts” are gravitating more towards rival Facebook’s Instagram.

Therefore, the analyst reiterates a Hold rating on shares of SNAP with a $22 price target, which represents a just under 5% downside from where the stock is currently trading.

Anthony concludes from a sidelined vantage point ahead of Snap’s earnings release, underscoring, “We see billboards for Snap but no real advertising online and their notifications are not as frequent. In addition, we are unsure whether Snap is aggressively seeking new users outside the U.S. the way Instagram has been. As such, we continue to remain cautious on Snap’s ability to grow its user base at a rate significant enough to justify the stock’s valuation.”

Victor Anthony has a very good TipRanks score with a 65% success rate and a high ranking of #117 out of 4,563 analysts. Anthony garners 13.4% in his annual returns. When recommending SNAP, Anthony earns 0.0% in average profits on the stock.

TipRanks analytics show SNAP as a Hold. Out of 38 analysts polled by TipRanks in the last 3 months, 12 are bullish on Snap stock, 18 remain sidelined, and 8 are bearish on the stock. The stock’s consensus target price stands at $22.97.

Yelp Takes a Guidance Hit, But Long-Term Still Worth It

Yelp shares are falling nearly 18% on back of the customer review platform management team’s guidance reduction, as ad revenue proved to underwhelm amid retention dips. However, Cantor analyst Kip Paulson still sees value in Yelp’s hand for the long-term, believing that opportunity is not scratched by one guidance miss.

In reaction to the print, the analyst reiterates an Overweight rating on YELP while cutting the price target back from $46 to $39, which represents a close to 37% increase from where the shares last closed.

For the first quarter of 2017, YELP posted $197.3 million in revenue, marking a 24.4% year-over-year climb, and adjusted EBITDA of $29.3 million, denoting a 14.8% margin, compared to FactSet consensus estimates of $198.3 million in revenue and $26.8 million in adjusted EBITDA. GAAP EPS came in at ($0.06), a hair better than consensus expectations of ($0.08).

Accordingly, the YELP team has pulled back on its guidance, reducing revenue guidance from $880 to $900 million down to $850 to $865 million, a miss against consensus of $888.7 million. Additionally, the outlook for adjusted EBITDA has been chopped from $150 to $165 million down to $130 to $145 million, a far cry from consensus of $160.6 million. For next quarter, management anticipates revenue to range between $202 to $206 million, underwhelming consensus of $215.1 million, and EBITDA of $32 to $35 million, once again under consensus of $36.8 milli8on.

Paulson’s price target reduction is attributed to “[…] management’s lowered outlook, precipitated by elevated churn within a cohort of less-established local businesses that entered the base a year ago (during the transition from CPM to CPC pricing),” he explains, adding, “Although management is addressing the problem and noted progressively better results in March/April, the damage to the 2017 outlook and near-term estimates is done.”

Yet, “Despite the setback, we view this as a buying opportunity given Yelp’s exclusive focus on the substantial local advertising opportunity, incremental revenue growth from still-nascent national and self-serve channels and transactions, organic scale and network effect, and attractive valuation relative to LT growth/profitability potential,” contends the analyst, urging investors to recognize one investor’s shockwave is another’s compelling investment prospect.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, three-star analyst Kip Paulson is ranked #1,435 out of 4,563 analysts. Paulson has a 73% success rate and realizes 11.2% in his yearly returns. However, when suggesting YELP, Paulson loses 2.7% in average profits on the stock.

TipRanks analytics demonstrate YELP as a Buy. Based on 14 analysts polled by TipRanks in the last 3 months, 8 rate a Buy on YELP stock, 5 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $35.92, marking a 25% upside from where the stock is currently trading.

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