Yelp, the popular local recommendation site, saw a significant increase in its shares on Monday following a bullish report from Goldman Sachs analysts. The analysts upgraded their rating on Yelp to Buy from Neutral and raised their price target to $47 from $38. They also revised their revenue and earnings projections for the next few years, indicating confidence in the company’s ability to sustain substantial growth.
Yelp’s stock surged 9.9% to $41.89 during afternoon trading on Monday, reflecting a year-to-date gain of 53%. In comparison, the S&P 500 has risen approximately 18% over the same period.
The analysts are increasingly optimistic about Yelp’s potential to achieve medium- to high-single digit revenue growth between 2024 and 2027. This positive outlook is driven by factors such as an improving local advertising landscape, increased investment in technology, and the establishment of a more diversified revenue base.
Moreover, the analysts foresee the possibility of margin expansion over the next five years, propelled by cost discipline and potential restructuring efforts. Yelp also aims to enhance shareholder returns.
In terms of capital allocation, Yelp has outlined three priorities. First and foremost, the company will focus on funding its current operations while allocating a portion of resources toward long-term growth opportunities. Second, mergers and acquisitions will be considered to drive further expansion. Finally, excess capital will be returned to shareholders through share repurchases.
Yelp’s first-quarter net revenue showed year-over-year growth, bolstered by strong demand for its advertising products. While sentiment among analysts remains divided, with 50% maintaining a Neutral rating, 20% endorsing a Buy rating, and 30% recommending a Sell, the outlook appears promising.
