Yelp shares jump 17.5% on solid Q4 results

Yelp handily beat Wall Street's expectations

Yelp shares were up 17.5% to $88.42 Thursday morning after the company delivered solid Q4 earnings results. The company reported an EPS of -$0.03 on revenue of $70.7 million, which handily beat Wall Street’s expectations of -$0.03 on $67.27 million in revenue.

The company’s Q4 revenue represents a growth of 72% over Q4 2012, while net loss in Q4 2012 was -$0.08 per share.

Full year revenue for 2013 was up 69% to $233 million.

The company’s massive revenue growth was largely driven by an increase in active business accounts, which were up 69% over Q4 2012 to 67,000. Additionally, local ad revenue was up 71% to $58.1 million. That’s a slowdown from Q3, which saw 80% growth in local ad revenue. But usage is growing, with average monthly uniques up 39% to 120 million, while net loss came in at -$0.15 a share, compared to -$0.30 a share in 2012.

“We view continued strength in user engagement as the single most important metric for long-term investors in Yelp. Notably, 21% of 4Q traffic came from outside the U.S., compared with 4% of revenue (a gap we expect to narrow over time),” wrote Macquerie Securities analyst Tom White, in a research note.

Yelp Platform, which was launched one year ago to help local service providers bridge the gap between drawing new customers and getting them to book online, hasn’t had much of an impact on revenue yet, but J.P. Morgan analyst Kaizad Gotla sees promise.

“We expect Yelp to continue adding additional service providers over the coming months, further solidifying Yelp’s position as a destination for local content and potentially local commerce in the future,” Gotla wrote in a research note. “We also believe the company’s 19M click to calls and 24M click for directions in 4Q represent a significant future monetization opportunity that’s relatively unmonetized today.”

Yelp is also seeing some strong mobile engagement. Of Yelp’s 120 million unique monthly visitors, 53 million were mobile users in Q4, and a full 30% of new reviews were created via mobile device.

And international business is also doing well. Yelp completed its acquisition of Europe’s Qype in Q4 and launched in New Zealand, the Czech Republic, Brazil and Portugal in 2013. Yelp is now active in 24 countries across five continents.

Yelp set its guidance at $73.5 million to $74.5 million, which was above Wall Street’s expectations of $73.3 million. But EBITDA is set lower at $8-$9 million, which may suggest more investments in the first quarter of 2014.  

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