Summary: OVERPRICED
Score: 5/20
MOS: 0%
Share Price: $40
Sticker Price: $0
Is Yelp stock a good buy?
Yelp is a crowd-sourced reviews business that was founded in 2004 and is based out of San Francisco, CA.
Here are some fun facts on Yelp.
- The company was founded by former PayPal employees Russel Simmons and Jeremy Stoppelman.
- By 2010 it had $30M in revenue and 4.5 million reviews.
- From 2009 through 2012, Yelp expanded throughout Europe and Asia.
- In 2009, they were nearly acquired by Google.
- In 2012 they went public.
- In 2014 they became profitable.
- By 2020 they had approximately 206 million reviews
- Yelp is used in 35 countries including Argentina, Australia, Belgium, Malaysia, the Philippines, Singapore, Spain, UK, and the US.
Although Yelp is a well-known review app, it’s not the only global player in the market. Here is how they stack up against the competition.
YELP (Yelp)
Score: 5/20
MOS: 0%
Summary: Overpriced
Number of countries/territories that use this platform: 35
GOOGL (Alphabet)
Score: 16/20
MOS: 60%
Summary: On Sale
Number of countries/territories that use this platform: 219
TRIP (TripAdvisor)
Score: 5/20
MOS: 0%
Summary: Overpriced
Number of countries/territories that use this platform: 45
Foursquare
Private
Number of countries/territories that use this platform: 190
As you can see, Yelp has a small global footprint compared to the competition. Competing with a conglomerate such as Google (Google Reviews) is a near-impossible feat. At the end of the article, I have an idea of how they can increase market share.
Here is what the news has to say.
This article from firestar.com from 6 years ago outlines some alarming feedback on Yelp. The article is titled “Do Small Businesses Really Hate Yelp? Why it’s so complicated.” A few of the hot points include Yelp filters out reviews that seem too good to be true, even if they are true. This can cause frustration for business owners who need more positive reviews. It’s also very difficult to remove fake reviews. And finally, Yelp has been battling extortion claims. Long story short, they have promised to hide negative reviews in return for advertising dollars. Overall, this last point is shocking. Although 6 years have passed and this may not be a concern today, it’s unfortunate these legal actions occurred at all. This is never good. It can be hard to steer a large ship back on track. Think about the “bro culture” issues, as stated by businessinsider.com, that happened with Uber in 2017. Events like this make it difficult for investors to jump back in.
Increasing positive press is now the focus and Yelp is taking action which is a great sign. This article from businesswire.com states that Yelp participated in the Evercore ISI Inaugural Technology, Media & Telecom Conference on 6/8/2021. This article from businesswire.com states that Yelp participated in the JPMorgan Global Technology, Media, and Communications conference on 5/24/2021.
Although Yelp is doing there best to improve the brand reputation, the financials still need improvement. Here is a closer look.
Revenue (Found on the Income Statement)
2017: $846M
2018: $942M
2019: $1B
2020: $872M
Revenues have declined.
Net Income (Found on the Income Statement)
2017: $152M
2018: $55M
2019: $40M
2020: -$19M
Net income has become negative.
EPS (Found on the Income Statement)
2017: 1.87
2018: .66
2019: .55
2020: -.26
EPS has also become negative.
Free Cash Flow (Found on the Cash Flow Statement)
2017: $137M
2018: $115M
2019: $167M
2020: $144M
Free Cash Flow has remained level. This is okay.
Total Assets (Found on the Balance Sheet)
2017: $1.2B
2018: $1.1B
2019: $1B
2020: $1.1B
Total Assets have also remained level.
Total Liabilities (Found on the Balance Sheet)
2017: $116M
2018: $100M
2019: $315M
2020: $300M
Total Liabilities have significantly increased in 2019 and 2020.
Total Debt (Found on the Balance Sheet)
2017: $0
2018: $0
2019: $232M
2020: $51M
Total Debt was fantastic in 2017 and 2018! $0 is exactly what we want to see but that number spiked in 2019.
Total Equity (Found on the Balance Sheet)
2017: $1B
2018: $1B
2019: $754M
2020: $854M
Total Equity has declined. This is not a good sign.
With a Score of 5/20 and a MOS of 0%, this stock is too risky. This business has a small moat as there are other review sites that consumers are using. If Yelp wants to increase its market share, it may have to change up its business model slightly or offer outstanding incentives for businesses to advertise. Establishing a new level of respect with local businesses should be the top priority. If they can do that, naturally the businesses will encourage the consumers to use the app and therefore increase the usage. It all starts with the businesses. How can Yelp make them feel like rock stars?
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