Yelp Earnings: An Early Look

Earnings season is in full swing, with many companies having already given their latest numbers to investors. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news.

Let's turn to Yelp (NYSE: YELP  ) . The social-media entertainment guide and review site has held up better since its early 2012 IPO than many of peers, but the company faces new challenges on the competitive front. Let's take an early look at what's been happening with Yelp over the past quarter and what we're likely to see in its quarterly report on Wednesday.

Stats on Yelp

Analyst EPS Estimate

($0.04)

Year-Ago EPS

($0.06)

Revenue Estimate

$40.3 million

Change From Year-Ago Revenue

62%

Earnings Beats in Past 3 Quarters (since going public)

2

Source: Yahoo! Finance.

Will Yelp get good reviews from Wall Street?
Analysts have reined in their views on Yelp slightly, now projecting slightly bigger losses for the quarter than it was a few months ago. The stock has been equally bouncy, having fallen more than 15% since the first of November but having regained much of the ground it lost following its previous earnings report.

Yelp has become the go-to place for reviews on restaurants, bars, and other local hangouts. Yelp takes the reviews that people voluntarily give it and uses them to draw more readers, while soliciting business accounts from the companies that get reviewed in exchange for enhanced profile pages and ad placements. Unlike AOL and IAC  (NASDAQ: IACI  ) , whose City Guide and CitySearch products relied largely on professional reviews, Yelp accentuates the social by relying almost exclusively on ordinary customers for their opinions.

But last month, Yelp just got a big wake-up call in the form of a challenge from Facebook (NASDAQ: FB  ) , whose new Graph Search aims to take recommendations from Facebook users and make them available to others in their social networks. Facebook hopes that the resulting recommendations will be more valuable than Yelp's because users will be connected to the people doing the reviewing, and Yelp's plunge in response to the Facebook announcement suggests that investors are buying that argument.

Still, Yelp isn't lying down. It recently added health inspection scores to its restaurant listings. That should help Yelp improve its relationships with local governments and boost its usefulness for customers further.

Yelp's numbers are relatively unimportant at this point compared to how it responds to the new Facebook threat. With a calm, measured approach aimed at accentuating its strengths, Yelp could bolster investor confidence and earn back some lost ground in its stock price.

Will Facebook crush Yelp?
After the world's most hyped IPO turned out to be a dunce, most investors probably don't even want to think about shares of Facebook. But there are things every investor needs to know about this company. We've outlined them in our newest premium research report. There's a lot more to Facebook than meets the eye, so read up on whether there is anything to "like" about it today, and we'll tell you whether we think Facebook deserves a place in your portfolio. Access your report by clicking here.

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