A month has gone by since the last earnings report for Yelp (YELP Quick QuoteYELP - Free Report) . Shares have added about 46.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Yelp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Yelp’s Q3 Earnings and Revenues Surpass Estimates

Yelp reported third-quarter 2020 loss of 1 cent per share, beating the Zacks Consensus Estimate by 96.7%. In the year-ago quarter, Yelp had reported earnings of 14 cents per share.

Revenues declined 15.9% year over year to $220.8 million but surpassed the Zacks Consensus Estimate by 9.5%.

The year-over-year decline was primarily due to coronavirus-led lockdowns and resultant shelter-in-home guidelines. However, as these restrictions began to ease gradually in the reported quarter, revenues jumped 31% sequentially.

Quarter Details

Advertising revenues (78.5% of total revenues) decreased 16.6% year over year to $211.2 million. This decrease was due to coronavirus-led reduction in advertising budgets by customers, particularly those in the restaurants and nightlife categories. Paying advertising locations declined 10% year over year to 507K sites in the third quarter.

Transaction revenues were $4.4 million in the third quarter of 2020, up 43.5% year over year due to increases in food take-out and delivery orders as a result of the coronavirus pandemic, which forced many restaurants to close for dine-in services and provide take-out and delivery services only.

Other service revenues decreased 17% to $5.2 million, primarily as a result of approximately $3 million in relief provided to customers in the third quarter of 2020, mainly in the form of waived fees.

Cumulative reviews climbed 10% year over year to 220 million. However, app-unique devices declined 15% year over year to 32 million on a monthly-average basis.

Total costs and expenses declined 16% year over year to $211 million.

Yelp’s third-quarter adjusted EBITDA declined 9.7% year over year to $52.7 million. However, adjusted EBITDA margin expanded 160 bps year over year to 23.8%.

Balance Sheet & Cash Flow

As of Sep 30, 2020, Yelp’s cash, cash equivalents & marketable securities were $591 million, up from $526 million as of Jun 30, 2020.

Net cash flow from operating activities was $71 million compared with the previous quarter’s $57.2 million.

Guidance

For the fourth quarter of 2020, Yelp expects revenues between $220 million and $230 million.

Moreover, operating expenses are expected to increase sequentially as the company restored reduced salaries in August. It has also completed the return process of furloughed employees in October.

Adjusted EBITDA margin is expected between 16% and 20%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted 53.06% due to these changes.

VGM Scores

Currently, Yelp has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Yelp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.