What's In The Cards For Yelp (YELP) This Earnings Season?

Yelp Inc. (NYSE:YELP) is set to report first-quarter 2017 results on May 9. In the last quarter, the company posted a 333.33% positive earnings surprise. It has an average four-quarter positive earnings surprise of 157.14%.

Let’s see how things are shaping up for this quarter.

Factors to Consider

Yelp derives its strength from connecting people with local businesses, which includes restaurants, shopping, beauty and fitness, arts, entertainment and events, home and local services, health, nightlife, travel and hotel, auto, and others.

Yelp delivered strong results in the fourth quarter, surpassing both top- and bottom-line expectations on the back of significant improvement in cumulative reviews and local advertising accounts. In the last quarter, Yelp acquired a leading restaurant waitlist service, Nowait. With the integration of waitlist in the Yelp app, customers can find out if seats are available in a restaurant and “get in the line remotely”. Recently, the company acquired Turnstyle Analytics, a Wi-Fi marketing company.

However, Yelp’s international business has been a dampener. We note that Yelp has underperformed the Zacks Internet - Content industry on a year-to-date basis. The company’s shares have lost 6.5% as against the industry’s gain of 19.8% during the period.

Moreover, stiff competition from players like Uber, GrubHub (NYSE:GRUB) , OpenTable and Amazon (NASDAQ:AMZN) and even major tech companies like Google (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) among others, is a big concern. All these companies are increasing their efforts to get a bigger share of the market.

For the first quarter, management expects revenues in the range of $195 million to $199 million.

Earnings Whispers

Our proven model does not conclusively show that Yelp is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Yelp has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at a loss of 8 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Yelp has a Zacks Rank #3, which when combined with a 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a couple of stocks that, as per our model, have the right combination of elements to post an earnings beat this quarter:

Nikon Corp (OTC:NINOY) with an Earnings ESP of +53.66% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy Co., Inc. (NYSE:BBY) with an Earnings ESP of +12.50% and a Zacks Rank #2.

Zacks' 2017 IPO Watch List

Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.

One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>