Yelp: A Hidden Gem in the Tech Landscape? Why Now Could Be the Time to Buy

As the tech sector grapples with valuation resets and macroeconomic uncertainty, one name stands out: Yelp (NYSE:YELP). With a 53% YoY EPS growth over three years, improving EBIT margins, and insider ownership at 8% (representing roughly $144 million in stakes), the question is clear: Is Yelp finally poised to deliver outsized returns?

The Growth Case: EPS Trajectory and Margin Expansion

Yelp's financial turnaround is undeniable. Since 2022, its EPS has surged, with the trailing twelve months (TTM) figure hitting $2.13 by March 2025—a stark contrast to its volatile early years (see Figure 1). Meanwhile, EBIT margins have nearly doubled, climbing from 5.91% in late 2023 to a robust 11.75% in March 2025. This margin expansion signals disciplined cost management and revenue growth from high-margin services like AI-driven advertising and transaction-based features.

The catalyst? A pivot toward recurring revenue streams. Services now account for over 60% of revenue, up from 50% in 2022, with AI tools like Yelp's Local Commerce Platform driving transaction growth. This shift has insulated Yelp from cyclical ad spending declines, making its earnings more predictable—a rarity in the tech sector.

Valuation: Undervalued Relative to Growth Prospects

Yelp's current P/E ratio of 17.56 is a bargain compared to peers like Alphabet (18.59) and Microsoft (34.66). Analysts project 43% earnings growth over the next 12 months, which—if achieved—would push the P/E to 12.25, further underscoring its appeal.

Even more compelling: Institutional ownership has risen to 13.71%, led by Vanguard, signaling confidence from large allocators. Analysts' median price target of $40.71—a 14% upside from today's $35.73—hints at near-term gains.

The Risks: Volatility and Insider Activity

No investment is without risks. Yelp's beta of 0.99 suggests it's slightly less volatile than the broader market, but its stock price has fluctuated sharply in recent quarters (see Figure 2). A prolonged tech-sector selloff or slower-than-expected AI adoption could test its resilience.

Additionally, select insiders have trimmed holdings in 2025. For instance, CEO Jeremy Stoppelman sold 6,160 shares in March, while CTO Samuel Eaton offloaded 12,904 shares in May. However, these sales are modest compared to their total stakes: Stoppelman still holds 821,160 shares, and CFO David Schwarzbach retains 239,112 shares. The 8% insider ownership remains a voting block that aligns their interests with long-term shareholders.

The Investment Thesis: Why Now?

Yelp's stock trades at a 28% discount to its 52-week high of $41.72, offering a rare entry point for growth investors. The combination of:
1. Structural margin improvements (11.75% EBIT in 2025 vs. 5.91% in 2023),
2. Recurring revenue streams driving predictability, and
3. Undervaluation relative to peers

makes this a compelling contrarian play. While volatility remains a risk, Yelp's fundamentals suggest it's transitioning from a speculative stock to a sustainable growth engine.

Final Verdict: Add to Your Watchlist—But Act Quickly

Yelp isn't a “flashy” tech stock, but its $2.13 TTM EPS, improving margins, and insider alignment make it a diamond in the rough. With a median price target of $40.71 and a P/E ratio that's half of some peers, this could be one of 2025's best overlooked opportunities.

Investors seeking a blend of growth and value should add Yelp to their watchlist now—but keep an eye on Q2 earnings (due July 2025) for further confirmation. For those with a 3-5 year horizon, this could be a stock that quietly outperforms the market.

Action Items:
- Monitor Yelp's Q2 2025 earnings for margin and revenue trends.
- Track institutional buying activity and insider transactions in the coming months.
- Consider a gradual entry at current levels, with a stop-loss below $32.

Yelp's transformation isn't just about survival—it's about positioning itself as a tech stalwart. The question isn't whether it's worth watching—it's whether you can afford to miss it.