RBC Capital Upgrades Yelp (YELP) to Outperform on Favorable Risk-Reward

RBC Capital upgraded Yelp (NYSE: YELP) from Sector Perform to Outperform with a price target of $42.00 (from $34.00), calling it a risk-reward call.

Analyst Mark Mahaney highlighted five factors for the upgrade:

1. Highly Attractive Risk-Reward – Our $42 PT leads to 62% implied upside. More importantly, our valuation analysis suggests reasonable 20% downside and 100%+ upside potential using YELP’s historical forward multiples – an attractive asymmetry in our view.

2. Realistic Path To Local Ad Revenue Growth Stabilization – Reaccelerating salesforce growth & reduced churn, a fully rolled out CPC Ad Solution, and a brand advertising campaign are all positive factors.

3. Strong And Improving Local Solution – Yelp remains a leading (if not the leading) branded local solution to connect Small Businesses with intent-driven consumers – Yelp’s App Rankings have consistently risen.

4. Still Significant Strategic Value – The Local capabilities and loyal user base the company has created could be attractive to a wide variety of Large Cap ‘Nets.

5. Core Play on Mobile and Native Advertising Growth – Yelp is a clear beneficiary of these two large secular tailwinds. And both of these experiences should be improved in the wake of shutdown of the Branded Display business and the buildout of Yelp’s transactions offerings.

For an analyst ratings summary and ratings history on Yelp click here. For more ratings news on Yelp click here.

Shares of Yelp closed at $25.90 yesterday.

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