Morgan Stanley Sees Revenue Headwinds For Yelp, Downgrades To Underweight

As previously reported, Morgan Stanley analyst Brian Nowak downgraded Yelp (YELP) to Underweight from Equal Weight as he identified three building revenue headwinds that he believes will lead to negative revisions and underperformance of the stock.

First, Nowak sees the increased flexibility of Yelp's new non-term agreements leading to lower spend per customer. Second, he sees pricing compression risk given that his ad pricing analysis shows Yelp's average cost per click is still over four times higher than Google (GOOGL) and Facebook (FB).

Third, he expects Yelp's declining user base to further hold back spend per customer. Nowak cut his price target on Yelp shares to $29 from $31, noting that his revised FY19 and FY20 EBITDA estimates are now 2% and 6%, respectively, below consensus. 


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