In a report published Wednesday, Citigroup analyst Mark May initiated coverage on Yelp (NYSE: YELP) with a Neutral rating and $35.00 price target.
In the report, Citigroup noted, “Local advertising represents one of the most attractive, bigpocket opportunities in the Internet sector, in our view. Considering Yelp’s position as a leading online destination for local business reviews, including on mobile, and considering the importance of content/reviews in influencing (offline) transactions, we believe Yelp is well positioned in this secular growth segment. Unlike some Internet companies, mobile represents a near- and long-term tailwind to Yelp’s business, and the company has a significant opportunity outside the U.S. However, our analysis suggests that the current valuation prices in either more upside to earnings than we believe is likely or reasonable to assume today (e.g., from new international markets contribution and/or new ancillary streams) or a take-out premium that we don’t consider in our analysis. As such, we are initiating with a Neutral rating and, all things constant, would look for a more attractive entry level to get more constructive. Our price target of $35 is in-line with current levels, and represents a forward EV/Revenue multiple of 8x, and is based on a 3-year revenue CAGR of 33%.”
Yelp closed on Tuesday at $37.24.
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Posted in: Analyst Color, Initiation, Analyst Ratings