This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Why I Love Yelp

Stocks in this article: YELP AAPL GOOG

NEW YORK (TheStreet) -- Yelp (YELP - Get Report) will report earnings tonight. It will be its first earnings call since going public.

I am long the company for several reasons:

1. Its growth is coming in bunches:

As of the end of last year there were 71 Yelp markets. The company added 22 last year and 22 the year before after adding only seven in 2009. There's a delayed effect in how a new market contributes to revenue -- in its S-1, Yelp reveals that markets founded in 2005-06 had average local ad revenues last year of $5.8 million, while the 2007-08 cohort had average sales of $1.1 million and the 2009-10 cohort had average sales of $143,000. That means that, between the three- and five-year mark post-launch, there's an explosion of revenue per market from almost $1 million per year in ad revenue to $6 million.

If you model it out, Yelp seems like a lock to do $113 million in local advertising this year. For the past two years, local has represented about 70% of their overall revenue (with brand ads and other services such as Yelp Deals -- a competitor to Groupon (GRPN) -- accounting for the rest). This suggests they're on track to do $160 million in revenues this year, not the analyst consensus of $124 million.

9 Stocks That Prove Dividends Make All the Difference >>

If you model out next year, Yelp seems on track to do $218 million in local ads next year and total revenues of $312 million. That's far ahead of the analysts' consensus of $177 million.

2. It is building a small-business social graph in which the data it owns are worth more than the ad revenue:

More important to me than the ad revenues Yelp can accumulate to me are the data. In the end, this information is the much more valuable part of its business and what will power its revenues three to five years from now. This data is going to power how ads and deals get served to consumers through mobile devices and smart TVs.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,678.70 +6.10 0.03%
S&P 500 2,057.09 +5.27 0.26%
NASDAQ 4,771.7630 +13.8840 0.29%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs