Yelp Shares Cut at BMO on 'Challenging' Ad Market Ahead

Yelp shares are lower after BMO Capital downgraded the company to market perform on a "challenging environment" in the local ad market ahead.
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A BMO Capital analyst on Monday downgraded Yelp  (YELP) - Get Report shares to market perform from outperform, saying he saw no "silver linings" in the online review platform's first-quarter results.

Yelp, like many companies, is struggling with the fallout from the coronavirus pandemic.

Shares of the San Francisco company at last check were down 3.4% to $22.66.

Analyst Daniel Salmon, who cut his price target on the shares to $26 from $33, said in a note to clients that "results were below our expectations and forward estimates head lower."

"We felt there were no 'silver linings' in the results that could help offset the challenging environment in the local ad market ahead," Salmon said in a note to clients." 

That's "clouding the transition to self-service/multilocation over the next 12 months, particularly in the restaurant vertical."

Salmon lowered his estimates for revenue and earnings before interest, taxes, depreciation and amortization for the rest of 2020 and all of 2021 "to reflect our less positive view on YELP."

Yelp offers reviews of various local business categories, including restaurants, shopping, and home and local services, all of which have suffered due to the coronavirus economic shutdown.

"Over the longer term, Yelp's digital platform could perform better in light of a macroeconomic recovery in 2021 and beyond," Salmon said.

Last week, Yelp beat Wall Street's first-quarter revenue estimates but posted a wider-than-expected lose of $15.5 million, or 22 cents a share, compared with net income of $1.4 million, or 2 cents a share, in the year-earlier period. 

Revenue totaled $249.9 million, up from $235.9 million. FactSet had forecast a loss of 9 cents a share on sales of $229.8 million.

"The emergence of the covid-19 pandemic has drastically changed nearly all aspects of life and has significantly impacted local businesses and their ability to operate as they once did," Co-Founder and Chief Executive Jeremy Stoppelman said in a statement.