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YELP Stock Soars as Q3 Earnings & Revenues Beat Estimates

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Yelp Inc. (YELP - Free Report) shares gained 4.5% during Thursday’s extended trading session after the company reported better-than-expected third-quarter 2023 results. Also, the third-quarter top and bottom lines marked a significant year-over-year improvement.

The company reported third-quarter earnings of 79 cents per share, which surpassed the Zacks Consensus Estimate of 35 cents. The bottom line increased 508% from the year-ago quarter’s earnings of 13 cents per share, mainly driven by higher revenues and the benefits of disciplined cost management.

Yelp’s revenues increased 12% year over year to $345 million and surpassed the Zacks Consensus Estimate of $341.2 million. The top line primarily reflected growth in advertising revenues.

Yelp Inc. Price, Consensus and EPS Surprise Yelp Inc. Price, Consensus and EPS Surprise

Yelp Inc. price-consensus-eps-surprise-chart | Yelp Inc. Quote

Quarter in Details

Advertising revenues (95.7% of the total revenues) climbed 12% year over year to $330 million, mainly driven by year-over-year increases in ad clicks and average CPC, partially offset by a 2% decline in Paying Advertising Locations. Our model estimates for Advertising revenues were pegged at $324.6 million.

Paying Advertising Locations reached 561,000, down 2% from the year-ago quarter but flat from the previous quarter. Per our model, Paying Advertising Locations were estimated to be 587,000 in the third quarter.

Within key categories, Paying Advertising Locations for the Services business declined slightly to 235,000 from 238,000 in the previous quarter. The Restaurants, Retail & Other (“RR&O”) category decreased by 1,000 from the second quarter of 2023 figures to 326,000.

Within Advertising, Services revenues grew 14% year over year to $206 million, with approximately 20% growth in the Home Services category. Advertising revenues from RR&O businesses increased by 10% year over year to a record $124 million.

Transaction revenues were $3 million in the third quarter, down 14% year over year due to a decrease in food take-out and delivery order volumes. Our model estimates for Transaction revenues were pegged at $3.6 million.

Other revenues increased 3% to $12 million, driven by the strong adoption of its Yelp Fusion and Yelp Knowledge programs. Our model estimates for Other revenues were $12 million.

Total costs and expenses increased 3% year over year to $303 million, reflecting the company’s continued investments in its long-term growth initiatives.

Yelp’s third-quarter adjusted EBITDA increased 30% year over year to $96 million. The adjusted EBITDA margin expanded 400 basis points year over year to 28%.

Balance Sheet & Cash Flow

As of Sep 30, 2023, Yelp’s cash, cash equivalents and short-term marketable securities were $427 million without any debt.

The company generated operating cash flow of $104.9 million and free cash flow of $99.2 million in the third quarter. In the first nine months of 2023, Yelp generated operating cash flow and free cash flow of $227.1 million and $206.3 million, respectively.

Updated 2023 Guidance

Buoyed by the strong quarterly performance, Yelp raised its full-year 2023 guidance. The company now projects 2023 revenues between $1.332 and $1.337 billion, up from the earlier range of $1.32-$1.33 billion. Adjusted EBITDA forecast has been raised to the $319-$324 million band from the $310-$320 million band projected previously.

Zacks Rank & Stocks to Consider

Currently, Yelp carries a Zacks Rank #3 (Hold). Shares of YELP have increased 56.5% year to date (YTD).

Some better-ranked stocks from the broader technology sector are Palo Alto Networks (PANW - Free Report) , NVIDIA Corporation (NVDA - Free Report) and Splunk (SPLK - Free Report) . Palo Alto and NVIDIA each sport a Zacks Rank #1 (Strong Buy), while Splunk carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Palo Alto Networks' first-quarter fiscal 2024 earnings has remained unchanged at $1.16 per share in the past 60 days. For fiscal 2024, earnings estimates have remained unchanged at $5.34 per share in the past 60 days.

Palo Alto Networks’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 22.2%. Shares of PANW have surged 72.2% YTD.

The Zacks Consensus Estimate for NVIDIA’s third-quarter fiscal 2024 earnings has been revised 10 cents northward to $2.10 per share in the past 60 days. For fiscal 2024, earnings estimates have moved 28 cents upward to $10.74 per share in the past 60 days.

NVIDIA’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing on one occasion, the average surprise being 9.8%. Shares of NVDA have surged 197.5% YTD.

The Zacks Consensus Estimate for Splunk's third-quarter fiscal 2024 earnings has been revised upward by a penny to $1.12 per share in the past 60 days. For fiscal 2024, earnings estimates have moved upward by 2 cents to $3.78 per share in the past 60 days.

Splunk’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 154.9%. Shares of SPLK have risen 70.65 YTD.

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