Yelp (YELP) is currently the go-to source for me– and most others — when looking up restaurants, and I depend on the pictures to do my ordering. The concept is great — Yelp is a valuable franchise — but it’s simply not making money and isn’t a stock I’d consider buying.
Yelp has been public since 2012 and hasn’t declared a quarterly profit once. Revenues are growing fast though, jumping from $138 million in 2012 to $233 million last year and maybe $366 million this year. Around 80% of its sales are derived from local business, who often pay Yelp a monthly fee. There’s further growth opportunity in selling daily deals, or Groupons, but so far Yelp hasn’t been able to take advantage of that opportunity as it should have.
One Year Chart
Here’s the one year chart of YELP. The stock’s been on a ride in the past year as its blasted from $30 to $100 and coming back down to around $60. The Est. Long Term Growth Rate of 152% is great, but big deal when you’re starting from nothing. No profits. No P/E.
What Yelp does have going for it is its expected to make $0.96 in 2016. That would be good, but it’s so far off and there’s little evidence that will in fact happen as the company hasn’t made a penny in any quarter since going public.
Fair Value
What’s Yelp worth? Who knows. You would really have to rip apart the financial statements and go to work. But in the end if the company takes the expected profits and spends it, well that could derail the stock anyway.
Sharek’s Take
Yelp is a great franchise and I want to have it on my radar just in case the company turns a profit and the stock becomes buyable (for me anyway). I’ll keep an eye on YELP and especially 2016 profits. If the company suddenly makes a quarterly profit that could cause the stock to jump and may be the time for aggressive investors to climb aboard.
View the Earnings Table here. View the Profit History here.View the Ten Year Chart here.
