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Yelp Inc: YELP Stock Catches Fire With Surprise Q2 Profit

YELP stock - Yelp Inc: YELP Stock Catches Fire With Surprise Q2 Profit

Source: Linny Heng via Flickr

Yelp Inc (NYSE:YELP) had a quarter to remember, proving that social networking has not yet passed its sell-by date … and sending YELP stock up by double-digits in Tuesday’s after-market trading.

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For the three months ending in June, the social review site reported earnings of $449,000, translating into a penny per share. That beat estimates for a per-share loss of 7 cents, while revenues of $173.4 million beat the consensus for $170 million.

Yelp hasn’t posted positive earnings since 2014; so naturally, YELP stock holders had something to celebrate.

Yelp’s Revenue Head Earns Promotion

Yelp said the number of local advertising accounts on the service grew 32% year-over-year to 128,000, while the number of unique devices accessing the service grew 27%, year over year, to about 23 million per month.

The numbers were good enough to earn Chief Revenue Officer Jed Nachman a promotion to chief operating officer, replacing Geoff Donaker. Donaker will remain a member of the Yelp board, CEO Jeremy Stoppelman said on the company’s conference call.

Nachman earned his promotion by shifting how Yelp does business, cutting out national advertisements and relying on a group of national account salespeople, field offices for local sales and a new “self-service” capability in which small businesses can order ads directly from the site. All these channels showed growth during the quarter.

Estimates Raised for the Year

Stoppelman raised Yelp’s outlook for the rest of the year, saying net revenue for the third quarter should be $180 million to $184 million, and $700 million to $708 million for the full year, again representing 27% year-over-year growth. Asked about the potential for being a $1 billion company next year, Stoppelman refused to predict it, but said it was a goal.

Stoppelman also announced an investment in Nowait, a company that tries to estimate wait times at restaurants that don’t take reservations. Nowait will be incorporated directly into the Yelp site this quarter, he said. The company’s “transaction” business, which takes reservations directly, grew 50% year-over-year to $6 billion in reservations, Stoppelman said.

YELP Stock Gets a Round of Applause

The reaction from investors was positive, as Wall Street bid YELP stock more than 10% higher in after-hours trading. There may have been a hint of good news in the Monday action, which saw shares rising 96 cents, or 3%, which was called a technical breakout by chart watchers.

Hedge fund manager David Einhorn of Greenlight Capital turned out to be right about the company and its prospects. Back in May, with YELP stock at around $20 per share, Greenlight took a stake in the company. Einhorn praised the move of its sales force to lower-cost cities, and the delivery of new reporting tools to customers.

Einhorn said at the time of his investment that if a bidding war emerged for Yelp, shares would be a lot higher. Other analysts also predicted major merger activity for the company before earnings. However, management did not address those rumors on the conference call.

Dana Blankenhorn is a financial journalist who dabbles in fiction, his latest being The Reluctant Detective Travels in Time. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/yelp-inc-yelp-stock-catches-fire/.

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