Hey Bear,
I almost joined you in YELP recently, but luckily decided to wait till after the earnings report. I saw yesterday after hours they were down almost 30%, now down about 20% on advertisers leaving and lowered guidance.
What do you think of their report and this drop, an opportunity, or a warning sign to stay away? I’m thinking the latter, but thought I’d ask what you were thinking of doing with your position (hold/buy/sell) since you’ve studied the company much more than I?
As everyone knows, they ALL can’t go up, I think we’ve all had a pretty good run overall this quarter. Keep up your very informative posts.
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I almost joined you in YELP recently, but luckily decided to wait till after the earnings report. I saw yesterday after hours they were down almost 30%, now down about 20% on advertisers leaving and lowered guidance.
What do you think of their report and this drop, an opportunity, or a warning sign to stay away? I’m thinking the latter, but thought I’d ask what you were thinking of doing with your position (hold/buy/sell) since you’ve studied the company much more than I?
Mike,
I have to say, I actually agree with Goldman on this one (their upgrade is probably why the shares are coming back today). I haven’t sold a share…in fact, I almost added at $24/share after hours yesterday…of course, now I wish I had.
Obviously any time a company misses on revenue and lowers guidance, that’s not a good quarter. But I really believe that the only thing bad about the way Yelp has handled the slow down is that they haven’t set the proper expectations. Perhaps it’s hard when you’ve been growing at 40%+ to slow down to 25%. But that’s probably reality now for them. Then again, I could imagine growth re-accelerating…if Facebook can grow at 50%, far be it from me to put a cap on a company’s growth potential no matter how much they’ve penetrated the market. But I don’t think Yelp needs to count on that kind of growth. Fact is, PE is at 35 right now. That is extremely low for a growth company. It’s not like they’ve tapped out their profitability levers either; they’re still in the early innings.
The point is, this is totally different from SHOP or WIX or HDP. It’s not about extreme revenue growth any more. But the value! Yelp is closing in on a billion dollar revenue run rate, probably not in 2017 but likely next year. Their market cap right now is just over 2B! Enterprise value is like 1.7B. (Shares are about $28 as I write.)
So, yeah, I see it as an opportunity.
Bear
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