Mark Holder
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Yelp: People Still Don't Believe

Despite another strong quarter, the average investor still doesn't believe the story at Yelp (YELP). Most people have missed the engagement in the Yelp app that allows the company to garner local ad revenues and bypass Google (GOOG)(GOOGL) search results. 

The company reported the following Q3 numbers:

  • Reports Q3 (Sep) earnings of $0.22 per share, $0.04 better than the Capital IQ Consensus of $0.18; revenues rose 29.7% year/year to $186.2 mln vs the $182.92 mln Capital IQ Consensus. 
  • Co issues in-line guidance for Q4, sees Q4 revs of $191-195 mln vs. $192.64 mln Capital IQ Consensus Estimate. Adjusted EBITDA is expected to be in the range of $36 million to $40 million.
  • Co issues upside guidance for FY16, sees FY16 revs of $709-713 mln vs. $707.61 mln Capital IQ Consensus Estimate. Adjusted EBITDA is expected to be in the range of $111 million to $115 million. 

The interesting commentary on Yelp is that the company reported a surprise profit, yet the non-GAAP earnings were $0.22. For some reason, the market tends to report GAAP numbers for this technology company. Maybe this contributes to the highly negative sentiment on the stock that now sits around the lows at 74% bearish according to StockTwits. 

Yelp is worth right around $3 billion now and trades relatively flat with the same level back in August after the Q2 report. With '17 revenues targeted towards $900 million and an enterprise value around $2.6 billion, the stock is still very cheap considering the opportunity in local advertising. 

Disclosure: Long YELP