Yelp (YELP, Financial) recently reported a strong guidance for the fourth quarter of 2014. It expects its revenue to be in the range of $107.0 million to $108.0 million. This represents approximately 52% growth on the same quarter last year. The company also expects its EBITDA for the fourth-quarter to range between $24.0 million and $25.0 million. Yelp for the full year, anticipates revenue of $375 million to $376 million that demonstrates strong 61% growth over last year 2013. Its adjusted EBITDA is estimated to grow about 138% to in the range of $69.5 million to $70.5 million. Let us look at the various growth drivers that could possibly enhance its profitability going forward.
International expansion will benefit Yelp
Looking ahead, the company should benefit from its international expansion. Yelp is strategically investing in the strategic acquisition that should enhance its cumulative review on the Yelp site and attract many advertisers and similar users. Also, the company is making smart moves with its goal of acquiring ‘go-to local’ business review site globally. It has recently acquired CityVox in France. CityVox is one of the nation’s biggest review sites in the region. Yelp had earlier acquired Germany’s Restaurant-Kritik, a restaurant review service.
Further, Yelp remains strong to integrate Restaurant-Kritik and CityVox’s review and photo content with its review site profile. Also, the company will be in a better position to enhance its content in France with CityVox’s Photo Library. This integration should enhance its review site performance and attract many users and advertisements to its folds. Besides, the company has recently launched Yelp in Hong Kong in September 2014. These smart moves better demonstrates its plans for expanding its operation globally that should drive its growth and deliver handsome returns to its shareholders in the long-run.
Yelp looks pretty strong with this global expansion that offers approximately Total Addressable Market or TAM of $100 billion in global local ad-spend. It has its presence in approximately in 66 foreign markets. Besides, Yelp expects its international revenue to gain traction in the upcoming quarters. It is planning to grow traffic and content in Italy that should turn out to be great monetization for the company. Yelp had witnessed significant increase in its international traffic. The company reported 40% growth to approximately 30 million unique visitors on monthly average basis in its international traffic.
Competition
However, Yelp sees strong competition across the industry. Its peer like Yahoo (YHOO, Financial) is strategically investing in the global expansion. It plans to make large transformative acquisitions in the near future. Yahoo remains on track to enhance its ad-tech stack and therefore is focusing on expansion of its existing verticals. It holds around 16% stakes in Alibaba Group (BABA, Financial). The company is also expected to benefit from its stake in Yahoo Japan.
Nevertheless, Yelp looks pretty good with these international investments that should enhance its growth and create significant value for shareholders going forward. Also, one of the research companies, Barclay has raised its revenue guidance for fiscal 2015 and 2016. The analysts at this firm expect the company to post revenue of around $27 million in 2015 and about $60 million in 2016. Also, the analysts have projected earnings of $0.68 per share in 2015 and $1.09 per share in 2016. The analysts also see the company reporting nearly $546 million in total revenue in 2020. That is an increase of approximately 30%.
Conclusion
Yelp looks pretty solid. It is investing aggressively in its international business that promises great returns in the long run. The analysts have estimated CAGR of 57.40%, greater than average industry CAGR of 20.31% for the next five years that indicate remarkable growth potential for the stock in the future.
