YELP INC. (YELP): what the price requires
The current priced-in claim for YELP INC. (YELP) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/YELP
Headline
| Field | Value |
|---|---|
| Ticker | YELP |
| Company | YELP INC. |
| Current price | $26.38/sh |
| Composition | Advertising 95% / Other 5% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 2.1% |
| Operating margin today | 11.1% |
| Margin compression implied | -9.0pp |
| Multiple paid | 8x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 9.4% cost of capital with 4% terminal growth over a 5-year stage.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.23σ |
| cohort percentile (of 210 peers) | 11 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.04x | 5 | expensive |
| Earnings | 1.01x | 5 | expensive |
| Relative | 0.59x | 5 | justifies |
| Growth | 0.59x | 3 | justifies |
Families that justify the price: Asset, Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.4%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $85.33 | 0.31x | yes | FCF base $0.3B, growth 2% (input: historical growth), terminal g 2.1%, WACC 8.4%, 5yr projection |
| DCF Exit Multiple | Growth | $44.79 | 0.59x | yes | Exit EV/EBITDA: 5.1x / 7.1x / 9.1x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $44.36 | 0.59x | yes | P/E 18x (static sector reference · 2026-04), scenarios: 15.1x / 18.0x / 20.9x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $25.30 | 1.04x | yes | BV/sh $10.63, ROE (TTM) 22.0%, ke 9.3% |
| Two-Stage Excess Return | Asset | $38.82 | 0.68x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $21.52 | 1.23x | yes | Rev $1.5B, growth 2% (input: historical growth; tapered), Terminal P/S: 0.9x / 1.1x / 1.2x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $26.16 | 1.01x | yes | EPS $2.18, growth 5% (input: historical EPS growth), PEG=2.28 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $13.52 | 1.95x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.11B × (1−40%) / WACC 8.4% → EPV (no growth) |
| Residual Income | Asset | $36.43 | 0.72x | yes | BV $10.63 + 5yr PV of (ROE (TTM) 22.0% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $22.83 | 1.16x | yes | √(22.5 × EPS $2.18 × BVPS $10.63) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $45.69 | 0.58x | yes | EBITDA $0.24B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $49.16 | 0.54x | yes | FCF $281.4M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $26.03 | 1.01x | yes | SBC-adj FCF $0.15B (FCF $0.28B − SBC $0.13B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $33.60 | 0.78x | yes | EPS $2.18 × (8.5 + 2×4.9%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $2.74 | 9.63x | yes | BV $10.63 × (ROIC 2.2% / WACC 8.4%) |
| P/Sales Sector | Relative | $61.81 | 0.43x | yes | Revenue $1.47B × sector P/S 2.5x |
| PEG Fair Value | Relative | $16.17 | 1.63x | yes | EPS $2.18 × (PEG 1.5 × growth 4.9% (input: historical EPS growth)) → PE 7.4x |
| Earnings Yield | Earnings | $23.57 | 1.12x | yes | EPS $2.18 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $110.4m |
| Net debt / NOPAT (after-tax) | -1.14x (net cash) |
| Net debt / operating income (pre-tax) | -0.68x (net cash) |
| Share count CAGR (buyback) | -4.6% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
- Yelp is a local-advertising business shifting toward home and professional services, where the 10-K notes it lets "Services businesses with the ability to provide competing quotes for consumers using our Request-a-Quote feature", and that Services line grew 8% to $948 million in 2025 even as restaurant and retail advertising fell.
- The defining risk is structural decline in the legacy half: restaurant, retail and other advertising dropped 6% to $444 million on macro and competitive pressure, and the price is cheap precisely because that erosion is real, not imagined.
- What to watch is capital return against a flat top line: the board added a $500 million buyback authorization in February 2026, extending a program that has cut the share count by 22% since 2021, even as 2026 adjusted profitability is guided lower on AI and acquisition investment.
Bull Case
The balance sheet tells you how much downside the price is already protecting against. Yelp carries no debt at all, holds about $110 million in net cash, and generates real operating cash, with trailing operating income near $182 million. A debt-free business throwing off cash does not face the refinancing or covenant risk that turns a cheap stock into a falling knife, and it gives management complete freedom over capital allocation. That freedom is being used aggressively: the board authorized an additional $500 million for buybacks in February 2026, continuing a program that has reduced the share count by 22% since 2021. Buying back more than a fifth of the company over a few years, while debt-free, is the clearest signal management thinks the stock is cheap, and it mechanically grows per-share earnings even when total profit is flat.
Underneath the buyback is a business that is quietly mix-shifting toward its better half. Full-year 2025 revenue rose 4% to a record $1.46 billion, and the growth came from Services, where advertising revenue climbed 8% to $948 million. Services is the structurally superior end of local advertising: a homeowner looking for a plumber or a contractor has high intent and high transaction value, and the 10-K describes the Request-a-Quote feature that lets "Services businesses" bid for that demand. As Services grows past half of revenue, the company's mix tilts toward the categories least exposed to the restaurant and retail weakness, which is the part of the story the depressed multiple ignores.
The valuation is the bull's strongest single fact. At about 7 times operating income, the price sits below what even a 5%-a-year decline in operating profit would warrant, and every valuation family supports the current level rather than calling it expensive. Net income actually grew 10% in 2025 to $146 million, a 10% net margin, so this is not a melting ice cube; it is a profitable, cash-generative business priced as though profit is about to fall meaningfully. With the cash, the absence of debt, and the buyback shrinking the base, the bull case does not need growth to reaccelerate. It needs the declines in restaurant and retail to be offset by Services and for management to keep retiring stock at single-digit operating multiples.
Bear Case
The structural truth a Yelp holder has to face is that the stock is cheap because part of the business is shrinking, and the cheap part is not obviously fixable. Restaurant, retail and other advertising fell 6% in 2025 to $444 million, which the company attributes to macroeconomic and competitive pressure, and management's 2026 guidance explicitly assumes that "challenging macro environment for RR&O will persist throughout the year." A business segment that is contracting and that management does not expect to recover next year is a structural problem, not a cyclical dip, and the low multiple is the market pricing exactly that.
The deeper fragility is dependence on traffic that Yelp does not own. The 10-K is candid that the business turns on consumers continuing to come to its platform, warning that the online shift in consumer habits "may not occur as quickly as we expect, or at all" and that the company suffers "if traffic to" its site declines. Much of that traffic has historically arrived through general search engines, and competitors with "strong or dominant positions in one or more markets" can use those positions to disadvantage Yelp. As search behavior shifts toward AI-generated answers that may not send users to a destination site at all, the risk to Yelp's traffic funnel is real and outside its control, and a local-advertising business with declining engagement loses its advertisers regardless of how well its Services product performs.
The near-term numbers also undercut the simple value story. The 2026 outlook is for roughly flat revenue, between $1.455 and $1.475 billion, with adjusted profitability guided lower because the company is increasing spending on its AI transformation, its Hatch operations, and paid-search customer acquisition. In other words, holding the top line flat now costs more, which compresses the margin that makes the stock look cheap. Analysts have grown more cautious in response, cutting the price target from around $40 toward roughly $30 and moving to a hold consensus, citing softer guidance, macro pressure on ad budgets, and engagement concerns. The bear case is that the buyback is doing the heavy lifting on per-share metrics while the underlying business stands still and pays more to do it.
Valuation
At the current price the market pays about 7 times company-wide operating income, a multiple so low that the price sits below what even a 5%-a-year operating-profit decline would warrant. That is a bound, not a precise forecast: the price is pricing in continued erosion, and the buyer's question is whether the decline is shallower than the multiple already assumes. Given that net income actually grew 10% in 2025, the embedded pessimism looks heavy, but it is not baseless, because the legacy advertising segment is genuinely contracting.
Unusually for an internet name, every valuation family supports the price rather than calling it expensive. The asset-based, earnings-power, peer-multiple, and forward-growth lenses all land at or near the price, which marks Yelp as a value-and-asset-supported name rather than a growth bet. When the methods agree the price is reasonable, the disagreement that matters is between the methods and the market narrative: the methods see a profitable, cash-generative business at a single-digit multiple, while the narrative sees a structurally challenged local-advertising platform losing relevance. The valuation does not resolve that tension; it simply shows the price is not demanding much for the business to clear it.
Solvency is a non-issue and is part of the thesis. Yelp has no debt, holds about $110 million in net cash, and the share count is shrinking at roughly 4.6% a year under the buyback. The downside is not financial distress; it is a slow fade in profit if the restaurant and retail decline outpaces Services growth and the rising investment spend keeps compressing margins. The offset is that the company is converting its free cash flow into a smaller share base at a low multiple, so even a flat business produces rising per-share value, which is the mechanism the bull and bear ultimately argue over.
Catalysts
The fourth-quarter and full-year 2025 results, reported in late February 2026, captured the split-screen story. Fourth-quarter revenue of $360 million slipped 1% as restaurant and retail advertising weakness offset Services growth, while net income was $38 million, or $0.61 per diluted share. For the full year, revenue rose 4% to a record $1.46 billion and net income grew 10% to $146 million, with Services advertising up 8% to $948 million and restaurant, retail and other down 6% to $444 million.
The forward catalysts are the 2026 guidance and the capital return. Management guided 2026 revenue to $1.455 to $1.475 billion, roughly flat, and adjusted EBITDA to $310 to $330 million, a decline driven by increased investment in AI transformation, the Hatch operations, and paid-search acquisition, while assuming the restaurant and retail macro stays soft all year. Against that flat outlook, the board added $500 million to the buyback authorization in February 2026, extending a program that has cut shares by 22% since 2021, so the per-share trajectory hinges on continued repurchases.
Sentiment has turned cautious. Analysts moved to a hold consensus and trimmed price targets from around $40 toward roughly $30, citing softer guidance, ad-budget pressure, and questions about user engagement and execution on new initiatives. The events most likely to move the thesis are the quarterly Services growth rate against the restaurant and retail decline, any stabilization or further erosion in traffic and engagement, and the pace of buyback execution against the flat revenue backdrop.
Peer Cohorts (Per Segment, With Filing Citations)
Yelp (whole company) (reported)
- TRIP (TRIPADVISOR, INC.)
- (no filing in the citation store)
- ZG (ZILLOW GROUP, INC.)
- (no filing in the citation store)
- CARG (CarGurus, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Yelp Q4 2025 results, February 2026 · Yelp 2026 guidance · analyst notes via public.com and stockanalysis.com, 2026