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Why Yelp Stock Rose 16% in February

By Demitri Kalogeropoulos - Mar 3, 2021 at 9:28AM

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Investors are betting on a growth rebound later in 2021.

What happened

Yelp (YELP -3.38%) shareholders outperformed a rising market last month. Shares rose 16% in February compared to a 2.6% gain in the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally pushed the tech stock's returns into solidly positive territory for the last year, but shares are still trailing the market's 25% surge since last March.

A couple uses a smartphone while sitting in a hotel room.

Image source: Getty Images.

So what

Yelp's early February earnings report included mixed operating results, with sales declining under the weight of pandemic pressures but profitability rising thanks to cost cuts. The growth trend was positive, though, with revenue improving quarter-to-quarter in each of the last two quarters.   

Now what

Yelp's business will remain pressured by reduced demand at local businesses like restaurants in early 2021. But there's a clear connection between the pandemic's declining threat and increased usage of the app.

That means Yelp could enjoy a significant rebound over the next few quarters as vaccines help suppress COVID-19 outbreaks. Investors are hoping that this boost, combined with the efficiency gains that management has enacted in the past year, will lead to sustainable profit generation following the $19 million loss the tech stock posted for fiscal 2020.

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