Yelp Inc., the popular website operator for consumer reviews, announced its earnings for the second quarter ending June 30, 2016. The results surpassed analysts' expectations.
The company's revenue for Q2 2016 exceeded projections from experts and as a result of the better-than-estimated profit, the shares of Yelp have hit a 52-week high.
For the unfamiliar, Yelp Inc. posted a total profit of $449,000 (1 cent per share) for Q2 2016. This figure is indicative of the service's growth as in Q2 2015, Yelp had netted a loss of $1.3 million and a net loss of $15.5 million in Q1 2016. In Q2 2016, the company's revenue grew to $173.4 million, a rise of 29.5 percent.
Given Yelp's Q1 2016 performance, analysts had forecast a loss of 7 cents per share, while revenue estimates stood at $169.8 million.
The better-than-anticipated profits for Q2 2016 also led analysts to elevate their recommendations for the company. Analysts cited prospective partnership deals and improved local advertising estimates as the reasons for the raised backing of the company's stock.
"We think there's significant room for strong revenue growth and margin expansion for Yelp as it remains relatively underpenetrated in local advertising," noted Doug Anmuth, analyst with JPMorgan Chase & Co. in a note on Aug. 10.
Anmuth's sentiments are echoed by Yelp's CEO Jeremy Stoppelman, who revealed that the company saw "enormous opportunity" in local transactions, as well as advertising. Stopppelman also added that Yelp was channeling its focus on luring more businesses and consumers to the service.
Buoyed by the fact that it surpassed analysts' revenue estimates despite a disappointing Q1 2016 earnings result, the shares of Yelp increased more than 13 percent to $35.90 on Tuesday, Aug. 9, in extended trading. In regular trading, the shares of the company notched up a 52-week high of $32.90.
The San Francisco-based company also gave a better-than-expected revenue forecast for the current quarter and said it partnered with and made a small investment in Nowait, a mobile platform that allows restaurants to manage their waiting lists.
Yelp Inc. also increased its annual revenue forecast from $690 million - $702 million to $700 million - $708 million. This projection exceeds analysts' estimates for the company's annual revenue, which stands at $699.8 million.
For Q3 2016, Yelp estimates a revenue of $180 million to $184 million, which also surpasses projections from analysts who are projecting revenues of $179.6 million for the current quarter.
Yelp, a major search engine for crowd-sourced reviews on local businesses, has been facing stiff competition with the entry of other big-name companies such as Amazon and Facebook in the small business niche. In April, the company launched a service called Request a Quote, which enabled customers to connect with businesses easily and find out how much their services cost.
