Somehow, Yelp Has Started 2021 Stronger Than Ever

A 10% pop in after-hours trading should tell us all we need to know about Yelp’s (NYSE: YELP) Q4 numbers which were released last night. Shares of the crowd-sourced review site have had a very strong start to the year and look set to keep carrying this momentum with them.

It wasn’t always going to be like this though. With restaurants and other businesses shut throughout much of 2020, there were few if any reasons for individuals to visit Yelp, or for businesses to advertise on it. The fact that Q4’s revenue was down 13% on the year is actually a good thing in the context of the year just finished and the year ahead. It means Yelp is one step closer to closing the chapter on what will probably come to be known as the toughest year in the company’s history with a solid spring in their step.

Back To Normal

The topline number was ahead of analyst expectations, as was EPS which showed the company turning a solid profit in spite of the battering their bank account took last year. Let’s not forget that August’s Q2 report had revenue down more than 30% compared to the same quarter in 2019.

Unsurprisingly, the company’s CEO Jeremy Stoppelman struck a positive tone with last night’s report. He spoke about how “2020 was a transformational year” for the company, and added “we preserved our financial strength throughout the pandemic as we increased the pace of product innovation to help consumers and local businesses stay connected while continuing to make significant progress on our long-term strategy. We increased monetization in Home & Local Services and completed the realignment of our go-to-market channels, driving more revenue growth through our Self-serve channel. As we look ahead, we are confident in our ability to return to sustainable revenue growth in 2021.”

The jump in after-hours trading and the strong bid saw in this morning’s pre-market session tells us that Wall Street is more than happy to row in behind his bullishness. The fact that net income was up 23% compared to the same quarter in 2019 probably helped and suggests that Yelp is coming out of the pandemic leaner and fitter than how it went into it.

Reasons To Get Excited

With sustainable growth among the top goals for the company in 2021, investors can look forward to the quarters ahead. Yelp is well-positioned to capitalize on the continued reopening of economies and a return to some kind of normality, where many consumers will go back to religiously checking Yelp reviews before making a decision on where to eat out at night.

They entered the pandemic having just crossed the $1 billion in revenue line for the full year 2019 and will be keen to get back on track for their long-term financial goals. These include achieving north of 30% EBITDA margins and having registered a 26% print in yesterday’s report we can be fairly confident of them hitting that this year.

The 200% rally seen in shares since last March’s all-time lows put them back above their pre-pandemic levels and sets up a run for 2018’s high of $50. Management has an aggressive share buyback program in place which tells us they think shares are cheap down here whilst also providing a solid bid that has underpinned the current rally. Don’t be surprised to see a few favorable upgrades to the stock from the sell-side this week as the numbers are digested - there are just too many things going their way right now for the bulls to ignore it.