Why Yelp, Inc. Stock Jumped Today

By Markets Fool.com

Image source: Yelp, Inc.

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What happened

Shares ofYelp Inc.(NYSE: YELP)were up 10.5% as of 12:30 p.m. EDT Wednesday after thelocal-business review company released stronger-than-expected third-quarter 2016 results.

So what

Quarterly revenue increased 29.7% year over year, to $186.2 million, including 41% growth in local revenue, to $163.6 million; 33% growth in transactions revenue, to $15.9 million; and 1% growth in "other" segment revenue, to $6.8 million. Based on generally accepted accounting principles (GAAP), Yelp's net income swung to $2.1 million, or $0.02 per diluted share, from a GAAP net loss of $8.1 million, or $0.11 per share, in the same year-ago period.

On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation, Yelp's net income soared nearly sixfold year over year, to $18.4 million, or $0.22 per share, up from $2.7 million, or $0.03 per share in last year's third quarter. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also increased 168.7% year over year, to $33.7 million.

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By comparison, Yelp's guidance (provided last quarter)called for lower revenue in the range of $180 million to $184 million and lower adjusted EBITDA in the range of $24 million to $28 million.

Yelp CEO Jeremy Stoppelman called his company's performance "outstanding," then elaborated on Yelp's strategic priorities going forward:

We continue to pursue our mission of connecting consumers with great local businesses everywhere, and our local business in the U.S. has accelerated this year. We have not yet achieved the same level of traction internationally and we have decided to redirect our resources toward the domestic opportunity for now. This was not an easy decision as it affects our valued colleagues abroad, however it allows us to sharpen our focus on the large, profitable and rapidly growing domestic business.

Now what

For the current quarter, Yelp expects revenue $191 million to $195 million, the midpoint of which represents roughly 26% growth over Q4 2015. Yelp also anticipates fourth-quarter adjusted EBITDA of $36 million to $40 million. For perspective, analysts' consensus estimates called for fourth-quarter revenue of $192.7 million, or just below the midpoint of Yelp's guidance range.

Finally, considering its outperformance so far this year, Yelp now expects full-year revenue in the range of $709 million to $713 million (up from guidance of $700 million to $708 million previously) and adjusted EBITDA in the range of $111 million to $115 million (up from $100 million to $108 million before).

All told, this was another straightforward beat-and-raise scenario from Yelp as it wisely hones its focus on sustaining growth in its core domestic market. So, in the end, even with shares now up nearly 70% so far in 2016, it's hard to blame investors for bidding up Yelp stock today.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Yelp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.