Yelp, the popular online platform for discovering local businesses, is set to announce its fiscal fourth-quarter results on February 15. With revenues and earnings expected to meet expectations, we anticipate little to no movement in the stock following the release. However, Yelp has already experienced significant growth since the beginning of 2023, with its stock price rising from $27 to $46, outperforming the S&P index's 31% increase.
Yelp's recent success can be attributed to its shift from focusing solely on local businesses and restaurants to also targeting multi-location advertisers. Additionally, there has been an upward trend in cost-per-click rates, further strengthening the company's position. Yelp has provided full-year revenue guidance for 2023 in the range of $1.332 billion to $1.337 billion, with adjusted EBITDA expected to fall between $319 million and $324 million.
Over the past three years, Yelp's stock has shown mixed performance. While it has seen gains of 30% from early 2021 to the present, it underperformed the S&P 500 in 2021 and 2022. In contrast, the S&P 500 boasted returns of 27% in 2021, -19% in 2022, and 24% in 2023. It has become increasingly challenging for individual stocks to consistently outperform the S&P 500, even for industry giants like Amazon, Tesla, and Toyota.
However, the Trefis High Quality Portfolio, consisting of 30 stocks, has managed to outperform the S&P 500 each year during this period. The portfolio's performance metrics reveal that it has provided better returns with less risk, indicating a less volatile investment journey. This raises the question of whether Yelp could face a similar situation as it did in 2021 and 2022 and underperform the S&P 500 over the next 12 months, or if it will experience a strong upward surge.
According to our forecast, Yelp's valuation is currently around $44 per share, aligning closely with the current market price. To delve deeper into Yelp's earnings potential in the fiscal fourth quarter, refer to our interactive dashboard analysis on 'Yelp's Earnings Preview: What to Expect in Fiscal Q4?'
For the fourth quarter of 2023, we estimate Yelp's revenues to be around $342 million, in line with consensus estimates. In the third quarter, Yelp recorded net revenue of $345 million, a 12% year-over-year increase driven by higher average revenue per location. Ad clicks grew by 9% compared to the previous year, while ad monetization improved, resulting in higher earnings per click. Furthermore, the average cost per click rose by 4% year-over-year. Despite inflationary pressures, Yelp's significant exposure to the restaurant industry has contributed to a 12% growth in advertising revenue during the third quarter. For the full fiscal year 2023, we forecast Yelp's revenues to reach $1.3 billion, representing a 12% year-over-year increase.
In terms of earnings per share (EPS), Yelp's Q4 2023 is expected to match consensus estimates at 38 cents, according to our analysis. The company has shown significant growth in this regard, with EPS increasing from a mere 13 cents in Q3 2022 to 79 cents in Q3 2023. Additionally, adjusted EBITDA experienced a 30% year-over-year growth, reaching a record $96 million.
Based on our estimation, Yelp's earnings per share for fiscal 2023 will be 98 cents, with a price-to-earnings (P/E) multiple of 45.1x. This translates to a price of approximately $44, closely aligning with the current market price.
Comparing Yelp with its peers can offer further insights. Our Yelp Peers analysis compares the company with competitors on key metrics that matter. For more comprehensive peer comparisons across various industries, be sure to explore Peer Comparisons.
While Yelp's stock performance in recent years has been inconsistent, its current trajectory indicates potential growth. However, given the uncertain macroeconomic environment characterized by high oil prices and elevated interest rates, there remains the possibility that Yelp could underperform the S&P 500 over the next 12 months. Only time will reveal whether Yelp will encounter hurdles similar to those it faced in 2021 and 2022 or if it will experience a substantial leap forward.
