Shares of Yelp (YELP, Financial) fell strongly after both the Q3 and Q4 2014 earnings reports as investors were concerned over Q4 direction and, thusly, over the decrease in client development rates reported in Q4. While general development and direction was solid in both quarters, it was not sufficiently solid to live up to investors' desires.
For the latest quarter finishing December 31, 2014, Yelp reported a 35% year-over-year increment in surveys (to 71 million), a 37% expansion in mobile interesting guests (to 72 million) and a 13% expansion in monthly exceptional guests (to 135 million).
Profiting from the acquisition
The acquisition of Eat24 back in February didn't snatch a huge amount of consideration. In light of the Q1 results and development from top contender GrubHub (GRUB, Financial), this buy is looking very good.
Yelp paid $134 million for Eat24 and as indicated by the earnings call, the request conveyance administration produced generally $9 million in revenue. Yelp just included $5 million the quarter with the nearby occurring generally mid-quarter. Yelp finished the quarter with a revenue run-rate of $112.5 million including the full quarter of revenue from Eat24. Over the conference call, the management justified the buy by saying:
“Our goal with the acquisition of Eat24 is to increase daily engagement in one of our most important verticals –Â restaurants. Based on the Nielson study we commissioned this month, approximately 70% of food orders in the U.S. were placed offline ... we believe there's significant opportunity for growth if those orders shift online.”
Eat24 as of now has around 20,000 restaurants on its platform in over 1,500 cities. Considering Yelp has only 93,700 active promoting records on its stage, those clients are really huge as a revenue stream and give magnificent prompts publicizing sales. Eat24's associations with those 20,000 diners ought to help Yelp to quickly expand its active promoting base.
Conclusion
Yelp’s shares were hammered after the quarterly results and still remain depressed due to multiple downgrades that followed the “terrible” quarter. However, the company is still reporting magnificent revenue and earnings growth and should benefit from the acquisition of Eat24. The company has successfully kept competition from Google and others at bay and is a great buy at the beaten-down levels.
