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Yelp Trades Near 52-Week Low: Is it the Right Time to Buy the Stock?
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Yelp Inc. (YELP - Free Report) , a well-known online platform connecting consumers with local businesses, has seen its share price plunge 26.2% year to date (YTD). It has significantly underperformed both the broader tech sector and the S&P 500, which have shown gains despite global economic concerns.
At the closing price of $34.91 on Sept. 27, Yelp currently trades near its 52-week low of $32.56 and nearly 29% lower than its 52-week high of $48.99. The stock’s underperformance can largely be attributed to growing global recessionary fears amid still-high interest rates and inflationary pressures.
Investors seem to be wary of Yelp’s near-term prospects amid the ongoing macroeconomic challenges as individuals and businesses pull back on non-essential spending, including vacations and restaurant visits, Yelp's primary business, centered on local business advertising. However, this recent dip could present an opportunity for investors.
YTD Price Return performance
Image Source: Zacks Investment Research
Valuation: A Favorable Entry Point for YELP Stock
Yelp's valuation has become increasingly attractive with the stock’s YTD decline. It is currently trading at favorable multiples compared to its historical averages and industry peers, signaling a potential buying opportunity for value-conscious investors. Its price-to-earnings ratio is lower than many other technology stocks, which suggests that the market might be undervaluing Yelp's long-term growth prospects.
Image Source: Zacks Investment Research
Additionally, the company crossed above its 50-day moving average on Sept. 27, 2024, indicating a bullish technical signal. A stock crossing this key technical level often hints at a potential reversal in sentiment, which is an encouraging sign for investors looking for a near-term recovery.
Moving Average
Image Source: Zacks Investment Research
Yelp’s Strong Fundamentals and Growth Drivers
Yelp’s business model has weathered challenges in 2024, but the company has several growth drivers that suggest it is well-positioned for a rebound. Yelp reported a solid second-quarter performance, beating both revenue and earnings expectations. The company generated $357 million in revenues for the second quarter, reflecting a 6% year-over-year increase, and its earnings per share (EPS) of 54 cents easily surpassed expectations by 31 cents.
Much of Yelp’s growth has come from its Services segment, particularly in home services, which saw 15% year-over-year revenue growth. This momentum in services is helping offset the weakness in the Restaurants, Retail and Other (RR&O) categories where many businesses continue to face macroeconomic headwinds. Yelp's focus on advertising revenue growth through its Services business remains a key strength, as this category continues to grow by double digits for the 13th consecutive quarter.
Moreover, Yelp's innovations in product offerings, such as Request-a-Quote, which facilitate user interaction with local businesses, and its AI-powered features like Yelp Assistant, are driving consumer engagement. These initiatives are further enhanced by strategic partnerships with platforms like Apple Maps, which now integrate Request-a-Quote functionalities.
Yelp is likely to continue its growth momentum, driven by its sustained focus on improving its advertising technology and expanding its self-serve ad platform, which saw 20% growth in the last reported quarter. Yelp’s self-serve channel, which allows businesses to manage their own advertising budgets, continues to be a major contributor to revenue growth, especially among small- and medium-sized businesses.
Furthermore, Yelp has been reducing costs and increasing efficiencies across its business. For example, the company’s adjusted EBITDA margin grew 100 basis points year over year to 26% in the second quarter. It has demonstrated its ability to improve profitability despite facing inflationary pressures and higher costs.
How Yelp Stacks Up Against Competitors
Yelp faces stiff competition from major tech giants like Alphabet’s (GOOGL - Free Report) Google, Microsoft’ (MSFT - Free Report) Bing and Meta Platforms’ (META - Free Report) Facebook in the local search and advertising space. Google dominates the market with its comprehensive search engine and Google Maps, where local businesses are often reviewed directly. This gives Google a massive reach and user base, making it Yelp’s most significant competitor. Microsoft Bing, while smaller, integrates local business results into its search ecosystem, leveraging its partnership with Yahoo and the integration with Windows products.
Facebook offers a different kind of competition through its vast social network where users can discover local businesses via recommendations from friends and communities. With targeted advertising capabilities, Facebook can reach a specific audience in local commerce.
While Yelp focuses on local reviews and direct interactions with businesses, its rivals have broader ecosystems and integrated services. However, Yelp’s strength lies in its niche expertise, trusted reviews and targeted ad solutions, allowing it to carve out a distinct space in the competitive landscape.
Conclusion: Buy Yelp Stock Now
While Yelp has faced a tough 2024 due to macroeconomic concerns and underperformed the broader market, its fundamental strengths, favorable valuation and technical indicators make it a compelling buy. The company’s continued innovation, strong performance in its Services business and bullish projections from analysts point toward significant upside potential.
Investors looking for a solid recovery play in the tech space should consider adding Yelp to their portfolios at these levels, especially as the stock trades near its 52-week low, offering an attractive entry point for long-term growth.
Additionally, Yelp currently sports a Zacks Rank #1 (Strong Buy) and has a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or #2 (Buy), offer the best investment opportunities for investors. Thus, the stock appears to be a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Yelp Trades Near 52-Week Low: Is it the Right Time to Buy the Stock?
Yelp Inc. (YELP - Free Report) , a well-known online platform connecting consumers with local businesses, has seen its share price plunge 26.2% year to date (YTD). It has significantly underperformed both the broader tech sector and the S&P 500, which have shown gains despite global economic concerns.
At the closing price of $34.91 on Sept. 27, Yelp currently trades near its 52-week low of $32.56 and nearly 29% lower than its 52-week high of $48.99. The stock’s underperformance can largely be attributed to growing global recessionary fears amid still-high interest rates and inflationary pressures.
Investors seem to be wary of Yelp’s near-term prospects amid the ongoing macroeconomic challenges as individuals and businesses pull back on non-essential spending, including vacations and restaurant visits, Yelp's primary business, centered on local business advertising. However, this recent dip could present an opportunity for investors.
YTD Price Return performance
Image Source: Zacks Investment Research
Valuation: A Favorable Entry Point for YELP Stock
Yelp's valuation has become increasingly attractive with the stock’s YTD decline. It is currently trading at favorable multiples compared to its historical averages and industry peers, signaling a potential buying opportunity for value-conscious investors. Its price-to-earnings ratio is lower than many other technology stocks, which suggests that the market might be undervaluing Yelp's long-term growth prospects.
Image Source: Zacks Investment Research
Additionally, the company crossed above its 50-day moving average on Sept. 27, 2024, indicating a bullish technical signal. A stock crossing this key technical level often hints at a potential reversal in sentiment, which is an encouraging sign for investors looking for a near-term recovery.
Moving Average
Image Source: Zacks Investment Research
Yelp’s Strong Fundamentals and Growth Drivers
Yelp’s business model has weathered challenges in 2024, but the company has several growth drivers that suggest it is well-positioned for a rebound. Yelp reported a solid second-quarter performance, beating both revenue and earnings expectations. The company generated $357 million in revenues for the second quarter, reflecting a 6% year-over-year increase, and its earnings per share (EPS) of 54 cents easily surpassed expectations by 31 cents.
Much of Yelp’s growth has come from its Services segment, particularly in home services, which saw 15% year-over-year revenue growth. This momentum in services is helping offset the weakness in the Restaurants, Retail and Other (RR&O) categories where many businesses continue to face macroeconomic headwinds. Yelp's focus on advertising revenue growth through its Services business remains a key strength, as this category continues to grow by double digits for the 13th consecutive quarter.
Moreover, Yelp's innovations in product offerings, such as Request-a-Quote, which facilitate user interaction with local businesses, and its AI-powered features like Yelp Assistant, are driving consumer engagement. These initiatives are further enhanced by strategic partnerships with platforms like Apple Maps, which now integrate Request-a-Quote functionalities.
Yelp is likely to continue its growth momentum, driven by its sustained focus on improving its advertising technology and expanding its self-serve ad platform, which saw 20% growth in the last reported quarter. Yelp’s self-serve channel, which allows businesses to manage their own advertising budgets, continues to be a major contributor to revenue growth, especially among small- and medium-sized businesses.
Furthermore, Yelp has been reducing costs and increasing efficiencies across its business. For example, the company’s adjusted EBITDA margin grew 100 basis points year over year to 26% in the second quarter. It has demonstrated its ability to improve profitability despite facing inflationary pressures and higher costs.
How Yelp Stacks Up Against Competitors
Yelp faces stiff competition from major tech giants like Alphabet’s (GOOGL - Free Report) Google, Microsoft’ (MSFT - Free Report) Bing and Meta Platforms’ (META - Free Report) Facebook in the local search and advertising space. Google dominates the market with its comprehensive search engine and Google Maps, where local businesses are often reviewed directly. This gives Google a massive reach and user base, making it Yelp’s most significant competitor. Microsoft Bing, while smaller, integrates local business results into its search ecosystem, leveraging its partnership with Yahoo and the integration with Windows products.
Facebook offers a different kind of competition through its vast social network where users can discover local businesses via recommendations from friends and communities. With targeted advertising capabilities, Facebook can reach a specific audience in local commerce.
While Yelp focuses on local reviews and direct interactions with businesses, its rivals have broader ecosystems and integrated services. However, Yelp’s strength lies in its niche expertise, trusted reviews and targeted ad solutions, allowing it to carve out a distinct space in the competitive landscape.
Conclusion: Buy Yelp Stock Now
While Yelp has faced a tough 2024 due to macroeconomic concerns and underperformed the broader market, its fundamental strengths, favorable valuation and technical indicators make it a compelling buy. The company’s continued innovation, strong performance in its Services business and bullish projections from analysts point toward significant upside potential.
Investors looking for a solid recovery play in the tech space should consider adding Yelp to their portfolios at these levels, especially as the stock trades near its 52-week low, offering an attractive entry point for long-term growth.
Additionally, Yelp currently sports a Zacks Rank #1 (Strong Buy) and has a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or #2 (Buy), offer the best investment opportunities for investors. Thus, the stock appears to be a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.