Yelp ($YELP) is scheduled to announce its fourth quarter financial results after the market closes on Monday 2/8. The expectations are low going in to the earnings call and recent checks by Wall Street analysts suggests that Yelp’s traffic problem still persists. Although the company continues to report good revenue growth, its performance metrics have grown at a decreasing pace, indicating that growth across its businesses is slowing down. Analysts expect Yelp to announce a loss of $0.03 per share and revenue of $152.35 million for the quarter.
Fundamental Analysis
The SprinkleBit Analyzer is a great tool provided through SprinkleBit’s premium subscription. Using the analyzer we compared Yelp’s ($YELP) fundamentals to Trip Advisor ($TRIP), Groupon ($GRPN), Yahoo ($YHOO), and Alphabet ($GOOGL) who all compete in the search and review/rating market. By running the fundamental measures for EBITA multiple and PE in comparison to the competition, we received s an implied share price of $ 8.99. If we were to compare on revenue multiple, we would have received a share price indicating that Yelp is undervalued. However in todays market, cash is king and the time of lofty valuations based of revenue is diminishing. With the current trading price of $ 18.14, (2/5 @ 11:00 am) Yelp ($YELP) is undervalued with 50.45%
Technical Analysis
We also took a dive into the technicals for Yelp’s stock to see where a potential miss or beat could move the price to. Technicals on the daily chart show that with an entry price of $18.14 and a miss, the stock could go down to $14. This represents a potential downside of 22.82%. On the contrary, with an entry price of $18.50 and a beat, the stock could go up to $22. This represents a potential upside of 21.28%. Risk/Reward for this trade in equals 0.93.
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