Yelp (YELP) Q3 Earnings: Will It Disappoint This Time?

Yelp Inc. (NYSE:YELP) is set to report third-quarter 2016 results on Nov 2. Last quarter, the company posted a 128.57% positive earnings surprise. However the company has posted an average negative earnings surprise of 195.64% over the past four quarters.

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

Factors to Consider

Yelp delivered strong results in the second quarter, surpassing both top- and bottom-line expectations on the back of significant improvement in cumulative reviews, local advertising accounts and app unique devices in the quarter.

However, the company is yet to make profits. Moreover, it also faces 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. All these companies are increasing their efforts to get a bigger share of the market. This apart, the company is embroiled in some lawsuits, which remain an overhang on financials.

From Sep 22, 2016, the company’s dual-share class structure (that is Class A and Class B) was converted into a single class of common stock. Consequently, the voting powers of the two classes of stock were eliminated, thereby resulting in less insider control and paving the way for a takeover.

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 -33.33% as the Most Accurate Estimate stands at a loss of 4 cents while the Zacks Consensus Estimate is pegged at a loss of 3 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

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

YELP INC Price, Consensus and EPS Surprise

YELP INC Price, Consensus and EPS Surprise | YELP INC Quote

Stocks to Consider

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

Stratasys Ltd. (NASDAQ:SSYS) with an Earnings ESP of +41.67% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Inovalon Holdings, Inc. (NASDAQ:INOV) with an Earnings ESP of +50.00% and a Zacks Rank #2

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