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Fundamentals Suggests Yelp Is A Short

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@rollandthomas
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Yelp Inc. operates a platform that connects people with local businesses in the United States, Canada, and internationally. It provides free and paid advertising products to businesses, as well as enables businesses to deliver targeted search advertising to local audiences through its Website and mobile application; and business listing products.

Yelp has this metric that measures local economic activity in the U.S. called the Yelp Economic Average (YEA). The YEA is a report that comes out quarterly and measures business and consumer demand across 30 sectors such as restaurants, food, nightlife, local services, automotive, professional services, home services, and shopping.

Despite a health economy, supported by a strong U.S. consumer, local businesses slumped in 2019 according to the annual YEA. For 2019, businesses nationwide saw a 1.3% decrease compared to 2018.

In early May, Yelp reported its quarterly earnings. The company topped revenue estimates but reported wider-than-expected losses.The CEO, Jeremy Stoppelman said revenue increased because of the strength of their strategy. But Jeremy also said, despite COVID-19, they started seeing early signs of stabilization in their business. However, their business is predicated on local business thriving and local consumer demand because over 90% of Yelp’s revenue was generated through ads.

American states have been slowly reopening their economies in the wake of the coronavirus pandemic, but thousands of businesses are still closed — many of them for good.

As of June 15, 140,000 businesses listed on the Yelp YELP, -3.01% review site remained closed due to the coronavirus pandemic. And of all the business closures since March 1, 41% of them have shuttered permanently, according to Yelp’s latest Local Economic Impact Report.

Los Angeles recorded the largest total number of closures with 11,774 business establishments shuttering, but Las Vegas has had the highest number of closures relative to the number of businesses in the city at 1,921.

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Speaking of businesses closing, after 85 years GNC, yes, the vitamin retailer filed for bankruptcy on Wednesday as COVID-19 continues to destroy retailers. GNC plans on closing 1200 out of 5800 stores. We haven’t even made to the half way mark in 2020, so I’m sure there will be other brand names in the same situation as GNC as the year unfolds.

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So lets close the loop, because of social distancing many retailers will be forced to operate with less capacity and because there is no vaccine yet, servicing less demand. So even if businesses are able to open up again, they will find themselves struggling to even cover their overhead cost. As more business close, thats ultimately less business for Yelp. Thus, from a macro view and based on the fundamentals, I think Yelp is going to retest the lows seen in March.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

Posted Using LeoFinance