Yelp reports widening losses, signs of stabilization

Yahoo Finance's Heidi Chung breaks down why some investors are still optimistic on Yelp, despite a widening loss in its first quarter earnings report.

Video Transcript

BRIAN SOZZI: Let's hit another Yahoo Finance Trending Ticker. That's Yelp, after the company reported earnings after the close yesterday. Yahoo Finance's Heidi Chung is back here.

Heidi, this stock's down about 43% in the past year. Is anyone using Yelp?

HEIDI CHUNG: Brian, well, Yelp is a company and an app essentially, a platform that a lot of people use when consumer activity is high. So obviously with the global pandemic, not many people are logging into Yelp to look up the next best restaurant to check out tonight. But that being said, Yelp shares were actually doing pretty well since the end of March. It was outperforming the broader market.

So a lot of analysts going into this report were a little bit more optimistic than they normally were. But you know, the stock sold off 9% after the company reported earnings. [INAUDIBLE] those losses is up about 3/10 of 1% right now. But taking a look at its first quarter, net revenue jumped 5.9% year-over-year to $289.9 million. First quarter adjusted EBITDA tanking 57% year-over-year to $16.9 million.

First quarter, they reported a loss per share of $0.22. And that compares to earnings of $0.02 in the same period last year. Now during the peak of COVID-19 in the US at the end of March, page views and searches of restaurants declined approximately 60% compared to the beginning of the month. And page views and searches for services declined approximately 40%, according to the company. Revenue in April declined by about 35% year-over-year.

The company saying, though, that it saw early signs of stabilization in its operations in late April. So some optimism on that front. But like a lot of other companies at the time, Yelp pulled its full-year guidance in April due to the uncertainty that was being caused by the global pandemic, Yelp saying at the time that it was laying off more than 1,000 employees, and furloughing about the same amount as well.

Like you mentioned, though, Yelp shares were getting hammered. They're down about 35% so far this year. And this company also relies pretty heavily on advertising. And as you can imagine, a lot of companies scaling back on their costs, so advertising taking a hit as well.

But once everything starts to come back online with the economies opening up in certain states-- a lot of bigger states, like California, looking to open up phase two of their economy this week as well-- we could start to see a big boost there. So a lot of analysts saying keep an eye out for Yelp. Don't start to discount the company so soon.

BRIAN SOZZI: Heidi, I liked your food review segment. I was watching it on Twitter last night. But overall, a pretty big week for fast food industry, a lot of earnings results. What stood out to you?

HEIDI CHUNG: You know, Brian, what we've been talking about a lot with Alexis, too, is the issue that the US meat supply is having at this point. A lot of the larger restaurants saying that they're not really seeing a knock to their supply chains at the moment. But the fact that Shake Shack came out and said that they're seeing a spike in beef prices, I think that's very concerning. And that's something that I'm definitely going to be keeping my eyes on in the weeks ahead.

BRIAN SOZZI: Yeah, interesting about the beef, Heidi. Wingstop CEO told us they're seeing record low prices for bone-in chicken. Interesting stuff out there. Thanks so much, Heidi.