Yelp Inc. (NYSE:YELP) had a third-quarter to remember as the company succeeded in shrugging off the COVID-19 shocks to post strong financial results that topped estimates. The company ended the quarter with a strong balance sheet and increased sales efficiency due to considerable resilience.
Underlying Growth
The stock powered high after the Chief Executive Officer reiterated that Yelp is on course to return to sustainable growth in the New Year while still managing the COVID-19 shocks. The stock is down by 30% for the year underperforming the NASDAQ, which is up by 32%. While the stock is still down for the year, it is increasingly showing signs of bottoming out of a tight trading range of between $18 and $26.
Supporting a break out from the current trading range is improving underlying fundamentals. RBC Capital Markets analyst Shweta Khajuria has affirmed the potential impact of early signs of recovery and reopening of the U.S economy. Yelp should benefit a great deal on traffic to shopping malls restaurants improving on the unveiling of a covid-19 vaccine.
Strong Results
As businesses and restaurants, from which the company draws most of its revenue remained shut as a result of the COVID-19 pandemic, the company posted a 16% year-over-year drop in revenues. Revenues came in at $220.8 million, up 35% quarter over quarter, affirming improving business activities heading into the year-end. Net loss in the third quarter came in at $1 million compared to $40 million posted in the first two quarters of the year.
Looking forward, management is projecting revenues of between $220 million and $230 million. However, the same is entirely dependent on whether physical distancing guidelines will come into play as the U.S struggles with the second wave of COVID-19 pandemic.
While Yelp's outlook has improved significantly compared to the first half of the year, the stock has still underperformed its digital media peers. The company’s core business could take a significant hit as colder weather continues to fuel the COVID-19 pandemic, which is increasingly taking a toll on small businesses.