Overview
Evercore ISI has reduced its price target on Yelp to $31.00 from $38.00, though the firm maintained an Outperform rating on the shares. The downgrade in target reflects what Evercore describes as persistent weakness in Yelp’s core advertising fundamentals, even as the company pursues new commercial initiatives. The stock has fallen nearly 25% year-to-date and is trading close to its 52-week low of $22.19. Data from InvestingPro cited by analysts indicates material upside relative to Fair Value estimates.
Quarterly results and near-term guidance
Yelp’s fourth-quarter 2025 results were mixed. Top-line revenue came in slightly above Street expectations while adjusted EBITDA beat forecasts by 4%. Despite that quarter-to-quarter resilience, the company issued guidance for Q1 and full-year 2026 revenue and EBITDA that fell short of market consensus, prompting caution from the research community.
On a trailing-12-month basis Yelp remains profitable, reporting EBITDA of $216 million and a gross profit margin of 90.47%—metrics that underscore operating leverage within the business, even as sales trends slow.
Advertising trends and segment performance
Evercore highlighted continued softness in Yelp’s advertising franchise. Services revenue has decelerated into the low single digits, while the Restaurants, Retail & Other (RR&O) segment was down by low double digits year-over-year. Yelp’s 2026 revenue guidance implies RR&O ad revenue could decline by roughly 15% versus the prior year, signaling near-term pressure in categories that have historically been core to Yelp’s monetization.
New initiatives and offsetting factors
Analysts pointed to a set of strategic moves that could blunt some of the ad weakness. These include an AI licensing agreement with OpenAI, a delivery partnership with DoorDash and the recent acquisition of Hatch. Evercore projects those initiatives will help drive over 60% growth in Yelp’s Other revenue category, providing a potential diversification tailwind as traditional ad bookings soften.
Balance-sheet metrics cited by InvestingPro reinforce Yelp’s financial flexibility: the company reportedly holds more cash than debt and carries a current ratio of 2.99, positioning management to invest through the transition or continue capital return strategies.
Profitability outlook and capital returns
Evercore models foresee a 13% year-over-year decline in EBITDA for 2026, attributing the drop to transformation-related spending and higher cash compensation. Looking further ahead, the firm anticipates a 30% rebound in GAAP EPS in 2027, predicated on tighter expense control, moderation of stock-based compensation and ongoing share repurchases under Yelp’s recently enlarged $500 million buyback authorization.
InvestingPro flagged management’s aggressive repurchase activity as a strength, and noted a strong free cash flow yield of 22% that supports continued buybacks and other capital allocation choices.
Fourth-quarter earnings detail
Yelp reported fourth-quarter EPS of $0.61, beating the consensus estimate of $0.53 by 15.09%. Revenue for the quarter was $359.99 million versus an expected $358.77 million, another slight upside versus projections. Market participants often use such beats and misses to recalibrate near-term expectations, but in Yelp’s case the company’s guidance has been the more significant driver of recent analyst revisions.
Takeaway
Evercore’s reduction of the price target to $31 reflects an analyst view that Yelp’s core ad business will remain challenged in the near term, even as newer revenue streams and a solid balance sheet provide offsetting positives. The company’s recent operational results, guidance and strategic initiatives leave a mixed but clear picture: advertising fundamentals are under pressure, while diversification, cash strength and capital returns offer paths to restore earnings momentum over time.