NEW YORK – Local online business and restaurant guide Yelp (NYSE:YELP) has accomplished something that much bigger companies have tried for years but failed – become the go-to resource for reviews of local businesses.
On Tuesday, the company announced their third quarter earnings, and it was terrific news for investors as Yelp beat expectations with revenue coming in at $61.2 million in the third quarter and a per-share loss of $0.04. For Wall Street, the consensus was that Yelp would deliver a loss of $ 0.1 per share on revenue of just over $ 59 million. One downside was the greater-than-expected loss of $ 2.3 million, but revenue increased 80 percent from the last year, and cumulative reviews (a measure of user traffic) grew by 42 percent year-over-year to 47.3 million. Average unique visitors also grew, and local business accounts grew 61 percent to 57,000.
The performance was due, in part, to solid progress in their local advertising sales business and strength in this area has helped Yelp’s share price to grow more than 180 percent in the past six months. However, some analysts worry that Yelp is overpriced, and shares have fallen more than 8 percent in pre-market trading on Wednesday.
In his review of the company’s third quarter performance, Yelp CEO Jeremy Stoppelman highlighted the company’s renewed focus on their mobile experience as a continuing source of growth and opportunity. Stoppelman also expects the ‘Yelp Platform,’ which launched in July and allows local businesses to interact directly with customers via Yelp’s portal, to provide additional value for businesses while increasing engagement among consumers. The company also saw continuing growth in unique user base over the last quarter, which now stands at 117 million.
Another strong sign for Yelp was EBITDA, which came in at $ 8.1 million compared to $ 2.2 million last year. The company also delivered 46 percent of their advertisements on mobile devices; this represents a 6 percent increase over the previous quarter and is a strong signal for the company.
However, Yelp’s performance here will need to be stronger going forward, considering companies in its class, like Facebook (NASDAQ:FB), FourSquare, and Google (NASDAQ:GOOG), have been able to drive significant increases in revenue by way of mobile advertising. The drop in share prices appears to be temporary, and this might be one stock to watch in coming quarters.
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