Yelp (YELP) Stock Rises After Barclays Raises 2015 and 2016 Estimates

NEW YORK (TheStreet) -- Shares of Yelp  (YELP) rose 5.78% to $63.47 in morning trading Monday after Barclays increased its EPS and revenue estimates on the online customer review company for 2015 and 2016.

Barclays cited Yelp's presence in numerous foreign markets as one of the reasons for the increase.

"Yelp has a presence in 66 foreign markets and there is a TAM of close to $100B in global local ad spend. But international revenues have remained sluggish so far at a ~$3M quarterly run rate, due in part to entrenched competition and cultural barriers but more so because it's still early days," the firm wrote in a research note.

"In this note, we analyze domestic cohort trends to predict the pace of international revenue growth, and based on our findings, we are raising our 2015 and 2016 revenue estimates."

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Barclays said it expects Yelp's international operations to contribute $27 million in revenue in 2015, $60 million in 2016, and $546 million, or approximately 30% of total revenue, in 2020.

Barclays now anticipates EPS of 68 cents in 2015 and $1.09 in 2016.

The firm also believes the recent dislocation in shares provides an attractive entry point. As a result, it reiterated its "overweight" rating and $85 price target.

Separately, TheStreet Ratings team rates YELP INC as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate YELP INC (YELP) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • YELP has underperformed the S&P 500 Index, declining 14.58% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Internet Software & Services industry and the overall market, YELP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for YELP INC is currently very high, coming in at 93.68%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, YELP's net profit margin of 3.54% significantly trails the industry average.
  • Net operating cash flow has significantly increased by 172.37% to $19.05 million when compared to the same quarter last year. In addition, YELP INC has also vastly surpassed the industry average cash flow growth rate of 26.90%.
  • YELP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 12.44, which clearly demonstrates the ability to cover short-term cash needs.
  • You can view the full analysis from the report here: YELP Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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