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Yelp’s stock remains in the doldrums after earnings miss

Yelp Inc. (NYSE: YELP) missed both revenue and profit estimates for the fourth quarter of 2019 when it reported results on Thursday. The stock, which dropped during after-hours trading, has still not recovered and was down 9% in early trade on Friday.

Revenues grew 10% year-over-year to $269 million but analysts were looking for $273 million. EPS fell to $0.24, missing estimates of $0.26. The revenue growth was lower than the company expected due to larger seasonal reductions by small and medium-sized business customers. Profits were hurt by higher income taxes during the quarter.

Looking at the full year, in 2019, the company managed to grow ad clicks for advertisers by 34% and reduce average cost per click by 18% through an efficient advertising auction system as well as ad targeting.

Also read: Roku Q4 2019 Earnings Report

In 2020, Yelp is looking to roll out new types of advertising such as themed ads and the company is also working on developing its customization capabilities so that advertisers can mould their campaigns based on their needs. These efforts are expected to help drive retention gains in the year ahead.

Yelp also sees a massive opportunity to grow its multi-location business going forward. The company is looking to include the multi-billion dollar digital advertising opportunity in the services category.

The company is revamping its sales channel mix and reducing its dependence on sales headcount to drive revenue growth. Yelp is also working on improving its margins by driving growth in its multi-location and self-serve channels, which are the most profitable.

Yelp expects revenues to grow 8-10% in the first quarter of 2020 and 10-12% in fiscal year 2020 versus the respective comparable periods.

The stock has dropped 17% in the past one year and 9% in the past one month. Two analyst firms have downgraded the stock following the fourth quarter results.

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