YELP AI Products Will Drive Upside Despite Near-Term Advertising Headwinds

Analysts have modestly reduced our Yelp price target to $40.00 per share, reflecting expectations for slower near term revenue growth and muted ad budgets, partly offset by improving margins and emerging AI driven upside.

Analyst Commentary

Street research on Yelp remains mixed, but recent commentary highlights a growing divergence between caution around near term ad demand and optimism about the company’s execution and product roadmap. While several firms have trimmed price targets in response to softer revenue outlooks, others are leaning into emerging AI driven opportunities and operational discipline as reasons to revisit the stock’s upside potential.

JPMorgan and Goldman Sachs have both reduced their price targets and reiterated Neutral stances after management lowered its 2025 revenue outlook and signaled limited visibility into a reacceleration in restaurant and retail ad budgets. These more cautious views emphasize that growth in Yelp’s core Restaurant, Retail and Other segment is likely to stay muted until macro conditions improve, even as the company continues to manage expenses prudently.

In contrast, bullish analysts have begun to frame Yelp as a structurally stronger, more diversified platform with underappreciated leverage from AI enabled services. A recent upgrade to an Outperform rating, alongside a higher price target, reflects growing confidence that newer AI products can expand Yelp’s total addressable market and support both top line growth and multiple expansion over time.

Bullish Takeaways

• Bullish analysts highlight Yelp’s AI receptionist and host call answering tools as a meaningful TAM expander that can drive new, higher value revenue streams beyond traditional ad formats, supporting a premium valuation versus historical averages.
• The recent upgrade to an Outperform rating, coupled with a higher price target, underscores growing conviction that Yelp can out execute peers in operational efficiency and product innovation, which some analysts view as justifying upside to current trading multiples.
• Positive commentary emphasizes that AI driven workflow automation for restaurants and local businesses can accelerate self serve adoption, improve retention, and create a more predictable growth profile, which is described as supportive of both margin resilience and the potential for multiple re rating.
• Bullish analysts also point to Yelp’s disciplined cost structure and modest expense base as a buffer against macro headwinds, arguing that incremental AI revenue could flow disproportionately to the bottom line and enhance free cash flow generation.

What's in the News

• Yelp announced its 2025 Fall Product Release, rolling out more than 35 AI powered features including Yelp Assistant for conversational local discovery, Menu Vision for menu scanning, and natural language search to surface more relevant, intent driven results (Key Developments).
• The company expanded AI solutions for restaurants and local businesses with Yelp Host and Yelp Receptionist, integrating with Yelp Guest Manager to automate reservations, waitlists, and follow ups, with subscription pricing starting at $149 per month or $99 for existing Guest Manager customers (Key Developments).
• Yelp continued integrating RepairPal’s booking system into search results and business pages, making it easier for users to schedule auto repair appointments directly through the platform while also enhancing visual tools like AI grouped before and after photos and Review Insights (Key Developments).
• The company lowered its 2025 net revenue outlook to a range of $1.460 billion to $1.465 billion, reducing guidance by $8 million at the midpoint (Key Developments).
• Yelp completed another tranche of its share repurchase program, buying back 1,596,000 shares for $52.69 million in the latest quarter, bringing total repurchases under the 2018 authorization to 43,698,000 shares, or just over 60% of the program (Key Developments).

Valuation Changes

• Fair Value: Unchanged at $40.00 per share. This indicates no adjustment to our intrinsic value estimate despite model updates.
• Discount Rate: Risen slightly from 7.97% to 8.25%, reflecting a modest increase in perceived risk or required return.
• Revenue Growth: Fallen noticeably from 4.55% to 3.31% annually, signaling more conservative expectations for top line expansion.
• Net Profit Margin: Improved modestly from 12.57% to 13.06%, incorporating expectations for better operating efficiency and cost control.
• Future P/E: Reduced from 13.28x to 12.25x, implying a slightly lower valuation multiple applied to forward earnings.