Yelp Stock Can Go Even Higher

Yelp Inc (NYSE: YELP) stock exploded higher by more than 26 percent on Thursday following a major earnings beat and positive commentary from the company. But even after the big gains, analysts say YELP stock could still have room to run in the long term.

In addition to big earnings and revenue beats, Yelp reported a 15 percent increase in active app users and said its advertising business is strong across the board.

Fortunately for investors who missed out on Thursday’s big move, analysts say it’s not too late to get in on YELP stock. Bank of America analyst Ryan Goodman says the big second quarter validates the strategic investments Yelp management has made in the company, and the stock could have significant upside for investors willing to stomach the risks.

“Looking ahead, tougher [year-over-year] comps and lower visibility are risks, but we are encouraged with execution [in the first half of the year. The 2018 outlook appears conservative and Yelp remains one of our top ideas entering [the second half of the year],” Goodman says.

Goodman says Yelp’s transition away from long-term advertising commitments seems to be encouraging advertisers to give the platform a try, and management’s controversial decision seems to be paying off.

“User engagement investments in the restaurant vertical are driving traffic growth, and we’re seeing benefits in higher value adjacent markets,” Goodman says.

He also says Yelp’s partnership with GrubHub (GRUB) is also yielding better-than-expected results.

Yelp’s second quarter was good enough for Bank of America to raise its full-year 2018 revenue and earnings before interest, taxes, depreciation and amortization estimates. Goodman now expects full-year EBITDA of $190 million on revenue of $962 million, up from previous estimates of $185 million and $956 million, respectively. Both estimates are on the high end of Yelp’s guidance ranges.

Looking ahead to 2019, Bank of America is calling for EBITDA of $244 million on revenue of $1.12 billion, representing 16.4 percent year-over-year revenue growth.

Goodman says YELP stock is trading at a slight valuation discount to its peer group based on enterprise value-EBITDA ratio. He says…

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