KEY POINT
- 1Q17 = THAT WAS EARLY (AGAIN): So we covered the short ahead of the print for whatever nonsensical babel we laid out in the note below. YELP delivered another early Christmas for the shorts, missing on 1Q revenues and puking both the 2Q and FY guide. The data is somewhat noisy since mgmt keeps playing Go Fish with its metric presentation, but we estimate that quarterly attrition accelerated to a record high after hitting a 2-yr high in 4Q. We estimate that new account growth actually held steady at 8 % y/y, but with self-serve accounts growing +70%, it's now even more likely that salesforce-driven gross adds are declining on y/y basis. Remember the entire model is predicated on driving new account growth in excess of its attrition, which we estimate is the overwhelming majority of its accts on annual basis. When new account growth starts declining, the model starts unravelling.
- SO MY WATCH BEGINS: Everything in Point 1 may not matter anymore this year. Our biggest misstep into this print was assuming that mgmt wasn’t going to flag the 2H17 weakness that we were originally targetting on our short this year. However, 2H appears to be the focus of the guidance cut, so the short may be played out. We'll revisit after consensus metrics are updated and reviewing the 10-Q, but more likely than not, we've missed the big payday and we're going to have to wait until next year to put the short back on.
YELP | Covering Short
05/04/17 07:39 AM EDT
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Let us know if you have any question or would like to discuss further.
Hesham Shaaban, CFA
Managing Director
@HedgeyeInternet
