Takeaway: We're side-stepping SNAP's 4Q17 print. We expect YELP to guide light for 2018 or miss revenues shortly after.

Position Monitor | Covering SNAP, Elevating YELP to Best Idea Short - I M Position Monitor

SNAP

As we said in our last update, SNAP may come in ahead of the consensus 4Q17 revenue estimates given the same seasonality dynamics that prevented it from doing so over the last two quarters.  It's also possible that SNAP reports accelerating rev growth given that the Olympic comp effect suppressed 3Q17 revenue growth by 25% percentage points. On DAUs, our most recent survey results aren't supporting our earlier theory that the older millennial cohorts are increasingly fading the platform, albeit our comp is somewhat dated.  That said, it's possible SNAP produces upside on both revenue and DAUs on this upcoming print, which we suspect the street would chase since it might appear as if the worst was behind the company.    

Position Monitor | Covering SNAP, Elevating YELP to Best Idea Short - SNAP   Survey comparison

YELP

The activist speculation last Friday gives us a better entry point on a short we were planning to revisit this year.  Even if there is an activist, we doubt they could force a sale; remember YELP seemingly tried and failed back in 2015.  But the main reason behind our short is that YELP is now more concentrated around its core, which has deteriorated to the point where we estimate that its salesforce-driven new account growth has started to decline, while its attrition rates may have stepped up indefinitely following the 2016 algo stunt.  Everything else (National, Self-Serve, RAQ) is just noise obfuscating the bigger picture.  The 2018 setup appears comparable to 2017 with consensus expecting too much out of Local, in part due to mgmt burying a 4Q17 Local guide-down via the Eat24 divestiture.     

Position Monitor | Covering SNAP, Elevating YELP to Best Idea Short - YELP   PAA Attrition 3Q17

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

Hesham Shaaban, CFA
Managing Director


@HedgeyeInternet