Why Yelp Shares Fell Last Week
Yelp stock fell 14.5% last week
Yelp (YELP) stock fell 14.5% in the week ended February 9, 2018, to close at $38.29. Yelp is now trading 42% above its 52-week low of $26.93 and 21% below its 52-week high of $48.40. Yelp announced its 4Q17 results on February 8, 2018, and reported revenue of $218.3 million, a rise of 12% YoY (year-over-year). Analysts expected Yelp to post revenue of $215.1 million in the quarter ended in December 2017. Yelp reported non-GAAP (generally accepted accounting principles) EPS (earnings per share) of $1.60 compared to analysts’ estimate of $0.05.
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Yelp CEO (chief executive officer) Jeremy Stoppelman stated, “We finished 2017 strong with rising growth in new advertiser acquisition and continued improvements in revenue retention from the prior year.” So why did Yelp stock fall despite the earnings beat in 4Q17?
Lower-than-expected guidance for fiscal 1Q18
During Yelp’s 4Q17 earnings call, management announced revenue guidance of $218 million–$221 million for fiscal 1Q18. The company expects revenue of $935 million–$965 million in fiscal 2018. Analysts expected Yelp to post revenue of $220 million in 1Q18 and $954 million in fiscal 2018.
In the trailing 12-month period, Yelp stock generated returns of -8% after the stock rose more than 10% in 2017.
Advertising revenue for Yelp has increased significantly over the last two years, which accounts for almost 90% of the company’s revenue. Advertising revenues for technology giants Twitter (TWTR) and Google (GOOG) were more than 85% of their total revenues, while for Facebook (FB) and Snap (SNAP), it was more than 95%.
Marketing research firm eMarketer has estimated that the global digital advertising market will grow to $375 billion by 2021 compared with $191.9 billion in 2016.