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Why Yelp Stock Popped on Friday

By Demitri Kalogeropoulos – Aug 6, 2021 at 12:28PM

Key Points

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The 2021 profit outlook is brightening.

What happened

Yelp (YELP -2.15%) investors gained ground on the market on Friday. The stock was up 9% as of 11:45 a.m. EDT even as the S&P 500 ticked slightly higher, according to data provided by S&P Global Market Intelligence.

The rally put the local business shopping platform's stock up sharply for the year, with gains over 20% compared to the market's 18% increase. The boost was powered by a surprisingly strong earnings report.

A woman checking her phone while shopping at a mall.

Image source: Getty Images.

So what

Yelp's revenue rose 52% in the quarter that ended in late June as a fast reopening around the U.S. drove higher demand for its advertising services. Restaurants in particular saw a sharp spike compared to a year earlier, when many in-person locations were closed due to COVID-19 social distancing efforts.

Management had been predicting a slightly lower Q2 result, but it was pleasantly surprised. "Our strong second quarter results give us the confidence to raise our full-year outlook," CFO David Schwarzbach said in a press release.

Now what

Yelp is now targeting just over $1 billion of revenue in 2021, along with between $200 million and $220 million of adjusted earnings (EBITDA). That sales forecast is just slightly higher than management's early May prediction, while the profit goal is significantly higher. "Yelp is a stronger and more efficient business than it has ever been," executives said in a letter to shareholders.

That improving efficiency, plus the lack of any hint of an impending growth slowdown, has investors feeling more optimistic about Yelp's stock today.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Yelp Stock Quote
Yelp
YELP
$28.70 (-2.15%) $0.63

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