Yelp Stock Receives Peerperform Rating from Wolfe Research, Potential Market Share Gains Pose Challenges
Wolfe Research initiated coverage on Yelp Inc. (NYSE:) stock on Tuesday, giving it a Peerperform rating. The firm pointed out potential hurdles for Yelp in achieving significant market share gains, especially in the Restaurants, Retail & Other (RR&O) segment. Increased spending on Search Engine Marketing (SEM) to boost Services revenue may also impact Yelp's double-digit percentage revenue growth.
Despite these challenges, Wolfe Research anticipates an enhancement in Yelp's EBITDA quality due to changes in the company's compensation strategy. However, the firm expects Yelp's GAAP profit profile to remain largely unchanged. With a valuation range set between $27 and $40, based on an estimated 2025 Enterprise Value/EBITDA (EV/EBITDA) multiple of 5 to 7 times, Wolfe Research believes this represents a discounted valuation compared to the digital advertising comparison group's median multiple.
Yelp's current trading multiple of 6.6 times the projected 2025 EBITDA, compared to its historical median of 8.3 times, suggests a cautious evaluation of the company's future financial performance within the digital advertising sector. InvestingPro insights further highlight Yelp's strategic financial moves, balance sheet strength, and impressive gross profit margins, providing investors with valuable information to consider.
In conclusion, Wolfe Research's assessment of Yelp's fair value and future prospects, combined with InvestingPro insights, offer a comprehensive overview of the company's financial standing. Investors can leverage this information to make informed decisions about their investment strategies and understand Yelp's position in the competitive digital advertising landscape.