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Will Yelp Inc. (YELP) Turn Around with a Beat in Q1 Earnings?

Yelp Inc. YELP is set to report first-quarter 2016 results on May 5. Last quarter, the company posted an 866.67% negative earnings surprise. The company has posted an average negative earnings surprise of 392.59% over the past four quarters.

Let’s see how things are shaping up for this quarter.

Why a Likely Positive Surprise?

Our proven model shows that Yelp is likely to beat estimates because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. The combination of Yelp’s Zacks Rank #3 and Earnings ESP of +18.75% makes us confident in looking for an earnings beat this quarter.

Factors to Consider

Yelp has been focused on expanding its platform to drive user growth. Not only has the company expanded to more international locations but has also been seeing strength in its local business leading to higher advertising revenues. Apart from decent growth in its core business, Yelp’s Eat24 and SeatMe are also performing well. Specifically, Eat24 is expected to be a significant growth driver in the to-be-reported quarter.

Recently, David Einhorn, a renowned hedge fund manager and founder of Greenlight Capital revealed his bullish sentiments for the company betting on the scope for growth despite a rocky performance in the past. Greenlight Capital bought about 380K Yelp shares in Feb 2016, as per an SEC filing.

However, the company is yet to make profits. Moreover, it also faces stiff competition from players like Uber, GrubHub GRUB, OpenTable and Amazon AMZN and even major tech companies like Google and Facebook among others. All these companies are increasing their efforts to get a bigger share of the market. In the past, the business has been impacted by the elimination of its brand advertising business.

Stock to Consider

Here is a stock, which you may consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Cinemark Holdings, Inc. CNK has an Earnings ESP of +2.13% and a Zacks Rank #2.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
AMAZON.COM INC (AMZN): Free Stock Analysis Report
 
CINEMARK HLDGS (CNK): Free Stock Analysis Report
 
YELP INC (YELP): Free Stock Analysis Report
 
GRUBHUB INC (GRUB): Free Stock Analysis Report
 
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