In a recent report, analysts at Tigress Financial Partners gave their take on Yelp Inc YELP 0.42% in light of the company’s recent acquisition of EAT24. Analysts reiterated their Neutral rating on Yelp’s stock.
Strong Growth, Expensive Stock
With 62 percent sales growth in the past 12 months, Yelp has one of the strongest growth profiles of any of the 2,200 companies that Tigress covers. However, analysts point out that Yelp is also one of the most “richly valued” stocks in their coverage universe.
Yelp’s 32x EV/EBITDAR and 85x EV/NOPAT suggests high expectations for the company.
EAT24 Vs. GrubHub
Analysts believe that Yelp’s acquisition of EAT24 will move the company deeper into the online and mobile food ordering service business, and result in more direct competition with GrubHub Inc GRUB 0.15%.
Analysts also feel that Yelp’s content is superior to GrubHub’s, and that the addition of EAT24 will lead to Yelp gaining market share in the space.
The report mentions one potential negative for EAT24 is that its restaurant offerings fall well short of GrubHub’s offerings.
Outlook
Analysts see the EAT24 as an important step for Yelp in the evolution of its business and see online food delivery offering strong growth prospects in the future. However, expectations for Yelp stock in the short-term are limited.
“Even after the steep post-earnings sell-off, which saw a sequential decline in unique visitors and mobile visitors, we think valuation remains elevated, and we still have concerns about competition in the space, “ analysts explain.
The report lists GrubHub, The Priceline Group Inc PCLN 8.46%, TripAdvisor Inc TRIP 3.6% and Google Inc GOOG 0.59%GOOGL 0.7% as Yelp’s primary competitors moving forward.
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