YELP | Thoughts into the Print (4Q15)

Takeaway: 2016 is unattainable, but not sure what mgmt has up its sleeve with guidance. Either way, we’re short until mgmt guides to reality

KEY POINTS

  1. 2016 IS UNATTAINABLE: Consensus is still not factoring attrition into its estimates, so it doesn’t understand the burden of new account growth necessary to hit those numbers.  In short, YELP needs to maintain its current new account growth rate every quarter from now through the end of 2016, and that’s assuming historically low attrition rates.  That’s highly improbable unless it accelerates its sales rep hires in excess of revenue growth guidance, and that alone might be a major red flag for the street.
  2. MACRO COULD MAKE IT WORSE: Remember that YELP caters to a relatively fragile customer base that doesn’t have economies of scale and is hostage to its local economics.  If we are moving into a recession as our Macro team suggests, it’s going to be that much tougher to sell into that environment, especially since Local Advertising spend typically declines in excess of national spend in a recessionary environment (see notes in first slide below), and would likely exacerbate its account churn.
  3. WHAT’S UP YOUR SLEEVE? Just because YELP can’t hit 2016 estimates doesn’t mean it won’t guide to them.  We saw that last year when YELP guided to 53% revenue growth (Eat24 included), then subsequentally cut its growth forecast to 44% two quarters later.  This time around, there’s no telling what mgmt will do here, especially since it has a history of doing whatever it can to disguise the issues at its core.  Either way, we suspect YELP really needs to show something on this release to drive its stock materially higher from here.  We’re staying short till mgmt guides to something more reasonable than what consensus is asking of them.

 

YELP | Thoughts into the Print (4Q15) - YELP   2016 Local Slide

YELP | Thoughts into the Print (4Q15) - YELP   mgmt lie slide

 

 

Let us know if you have any questions or would like to discuss in more detail.

 

Hesham Shaaban, CFA


@HedgeyeInternet 


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more