# Yelp: $179.4 million of cash flow shrinks to $107.9 million once taxes and a strong half-year drop out YELP, NYSE. Published October 23, 2026. Price as of the October 22, 2026 regular session close. Values in US dollars. ## Verdict: HOLD at $20.70 At the $20.70 close my Base value of $21.54 is 4.1% above the price, inside the fair value band. The two methods give $22.41 and $20.23, and neither makes the shares a buy. Confidence is C, the required margin of safety is 45%, and the maximum buy price is $11.85, so the price is 74.7% above it. Last-twelve-month owner cash of $179.4 million was flattered by tax timing and a strong second half of 2025, and I value $107.9 million. Hold, watchlist for new money. - Bear value: $10.31 - Base value: $21.54 - Bull value: $33.91 - Upside to base value: +4.1% - Maximum buy price: $11.85 - Required margin of safety: 45% - Owner cash yield, normalized: 9.4% - Owner cash yield, last 12 months: 15.6% - Net debt: $23.9 million - Business quality: 63/100 - Valuation score: 38/100 - Confidence: 14/25, grade C Yelp produced $179.4 million of owner free cash flow over the last twelve months, after stock pay and all capital spending. That is 15.6% of its $1.15 billion market value, but most of it arrived in the second half of 2025. In the first half of 2026 owner cash was $49.9 million, taxes paid in cash were a quarter of the tax charge, and earnings are falling. On a full-tax, guidance-based footing I value **$107.9 million**, 9.4% of the market value. At the $20.70 close my triangulated Base value of **$21.54** is 4.1% above the price, inside the 15% band I treat as fair value. The Bear value is $10.31 and the Bull value $33.91. Weighting the three cases 30%, 50% and 20% gives $20.64. Confidence is grade C (14/25), the required margin of safety (MOS) is 45%, and the maximum buy price is **$11.85**, so the price is 74.7% above it. The two valuation methods give $22.41 and $20.23, a 10% gap, and the shares are fairly priced in either case. Valuation route: a local advertising marketplace that is shrinking slightly in its core. Primary method: a five-year discounted cash flow on normalized owner cash. Secondary method: enterprise value to cash earnings (adjusted EBITDA minus stock pay and capital spending). Net debt of $23.9 million, including the unpaid retention payments from the Hatch acquisition, is counted once. ## What Yelp is Yelp sells advertising to local businesses, mostly through its listings and search results. Services advertisers such as contractors and home services bring in the most revenue, while restaurants, retail and other categories are smaller and shrinking. It has about 510,000 paying locations, an 85.6% gross margin and a 16.6% return on invested capital. In 2026 it bought Hatch, an artificial intelligence tool for service businesses, for $271 million plus about $30 million of retention payments over two to three years. The risk is how customers find local businesses. Yelp relies on search engines and app stores for traffic, says so in its filings, and does not quantify the share. If AI assistants and agents become the first place people ask for a plumber or a dinner reservation, a listing business loses ground. Advertising clicks fell 5% in the June quarter. ## The latest quarter | Second quarter of 2026 (to June 30) | Result | | --- | --- | | Revenue | $375.5 million, +1.4% year on year (about -1% without Hatch) | | Services advertising | $241.0 million, flat | | Restaurants, retail and other advertising | $101.5 million, down 10% | | Advertising clicks | Down 5% | | Operating income (GAAP) | $47.6 million, from $53.4 million | | Adjusted EBITDA | $91.4 million, down 9%, margin 24% from 27% | | Net income | $31.7 million, down 28% | | Full-year 2026 guide, adjusted EBITDA | $315 million to $325 million (first half $170.8 million) | | Third-quarter guide, revenue / adjusted EBITDA | $365 million to $370 million (about -2% from $376.0 million) / $70 million to $75 million | | Cash / revolver drawn | $94.1 million / $100.0 million | The guide implies adjusted EBITDA of $144 million to $154 million for the second half, against $170.8 million in the first. Revenue is flat to slightly down and margins are compressing. That is the opposite of the picture in the trailing cash flow. ## Which cash to value I value owner cash: operating cash flow minus all capital spending, including capitalized software, minus stock pay. For Yelp stock pay is $118.0 million a year, about 7% of revenue, which is 66% of the owner cash that is left after it, so ignoring it would change the answer. | $ million, twelve months to June 2026 | Amount | | --- | --- | | Operating cash flow | 349.6 | | Capital spending and capitalized software | -52.2 | | Stock-based compensation | -118.0 | | Owner cash, last twelve months | 179.4 | | First half 2025 / second half 2025 / first half 2026 | 60.2 / 129.4 / 49.9 | I do not use the twelve-month figure as the base, for four reasons. First, taxes: Yelp paid $15.1 million of cash tax against a provision of $57.6 million, and in the first half of 2026 it paid $6.6 million against $25.0 million, a timing benefit of about $42 million a year. Second, the third quarter of 2025 had operating cash flow of $131.5 million with a $23.4 million rise in payables, which will not repeat. Third, organic revenue is shrinking and the guide is lower. Fourth, the Hatch cash cost, with about $12 million of integration spending excluded from adjusted EBITDA in 2026. | Normalized owner cash, 2026 guide with full tax | $ million | | --- | --- | | Adjusted EBITDA, middle of guide | 320.0 | | Stock pay, run rate (about 7% of $1,465 million of revenue) | -100.0 | | Capital spending and capitalized software | -56.0 | | Tax at 28% on pre-tax income of 146.8 (my estimate) | -41.1 | | Working capital and contract-cost drag (my estimate) | -15.0 | | Normalized owner cash | 107.9 | Cash taxes were far below the tax charge, so I used a full tax rate. Pre-tax income of $146.8 million is adjusted EBITDA less stock pay and depreciation and amortization of $73 million, with interest treated as zero. The first half of 2026 delivered $49.9 million of owner cash, about $100 million annualized, which supports a figure near $108 million and not $179 million. The correction is immediate, because the guide covers the current year. ## Shares, debt and buybacks Cash of $94.1 million less the $100.0 million revolver and about $18 million of Hatch retention still to be paid (my estimate) is net debt of $23.9 million. I do not deduct operating leases of $23.3 million, because rent is already in the profit I value. Shares were 54.98 million at June 30, plus 0.6 million of dilution, so I use 55.58 million. Cash and shares are both taken at June 30. The share count has fallen from 82 million in 2018, but the sequence in 2026 was a $174 million first-half buyback, 164% of free cash flow and partly funded by drawing $165 million on the revolver, at an average $24.92 in the second quarter, followed by a debt-funded acquisition at 7.7 times revenue and a pause in repurchases until 2027. At $20.70 that buyback looks expensive, and I count it against capital allocation. $339 million of authorization remains. ## The primary valuation: discounted owner cash I discount five years of owner cash, then a final value. Year one is the normalized $107.9 million, and all inputs are my assumptions. | Case | Year-one owner cash ($ million) | Growth, years 2 to 5 | Discount rate | Growth after year 5 | | --- | --- | --- | --- | --- | | Bear | 72 | -2% | 12% | 0% | | Base | 107.9 | 2% | 10.5% | 2% | | Bull | 140 | 5% | 10% | 2.5% | The Bear is adjusted EBITDA near $285 million: search and AI substitution shrinks services leads, restaurants, retail and other keeps falling 10% a year and Hatch does not pay back. The Bull is adjusted EBITDA near $355 million, with other revenue reaching its $250 million target and the Assistant lifting project volume. Base is **$22.41** a share. | Base value per share | Growth 0% | Growth 2% | Growth 4% | | --- | --- | --- | --- | | Discount rate 9% | $25.51 | $27.30 | $29.20 | | Discount rate 10.5% | $20.98 | $22.41 | $23.92 | | Discount rate 12% | $17.80 | $18.98 | $20.23 | Moving only the starting cash, $90 million gives $18.62, $107.9 million gives $22.41 and $135 million gives $28.15. ## Where the value sits The value after year five is 56% of the Bear, 67% of the Base and 71% of the Bull primary value. That is well below the 85% level at which a five-year model deserves a second look, so the answer is not mostly a bet on far-off years. ## The secondary valuation: a multiple of cash earnings The second method takes adjusted EBITDA minus stock pay and capital spending: $129 million in the Bear, $164 million in the Base and $204 million in the Bull. It applies 5.0, 7.0 and 8.5 times and subtracts net debt, which gives $11.18, **$20.23** and $30.77 a share. These multiples are before tax, so I translated them to see what they assume. After 28% tax, 7.0 times is 9.7 times earnings, which at a 10.5% required return means earnings that stay flat, about +0.2% a year forever. That is my Base view: the listings business is not growing, the core is shrinking slightly and the guide is down. The Bear multiple of 5.0 times is 6.9 times after tax, earnings shrinking about 2.1% a year at 12%. The Bull multiple of 8.5 times is 11.8 times after tax, +1.4% a year at 10%. None of these requires heroic growth, and a company with falling clicks should not get more. I have no peer table, so the multiples are my assumptions. ## Same business, two lenses | Base case, $ million unless stated | Owner cash model | Cash earnings multiple | Market today | | --- | --- | --- | --- | | Enterprise value | 1,269 | 1,148 | 1,174 | | Net debt | 23.9 | 23.9 | 23.9 | | Equity value | 1,246 | 1,124 | 1,151 | | Value per share | $22.41 | $20.23 | $20.70 | | Enterprise value to adjusted EBITDA (320) | 4.0 times | 3.6 times | 3.7 times | | Enterprise value to EBITDA less stock pay and capital spending (164) | 7.7 times | 7.0 times | 7.2 times | | Enterprise value to normalized owner cash (107.9) | 11.8 times | 10.6 times | 10.9 times | The two methods differ by 10%, inside my 20% tolerance, and the market price sits between them. The owner cash model gives credit for 2% growth and a 10.5% discount rate, and the multiple assumes flat earnings, so the gap is small and explainable. The weighted Base of **$21.54** (60% model, 40% multiple) sits in a range of $20.23 to $22.41. Both methods start from the same guided EBITDA, so their agreement does not raise my Confidence. The choice of method does not change the decision. The maximum buy price is $12.33 on the owner cash model alone and $11.12 on the multiple alone, against a share price of $20.70. ## Bear, Base and Bull | Per share | Owner cash model | Cash earnings multiple | Combined (60/40) | Probability | | --- | --- | --- | --- | --- | | Bear | $9.73 | $11.18 | $10.31 | 30% | | Base | $22.41 | $20.23 | $21.54 | 50% | | Bull | $36.01 | $30.77 | $33.91 | 20% | The probability-weighted value is $20.64. The gaps between the two methods are 14% in the Bear, 10% in the Base and 16% in the Bull. The Bear is the one case where the multiple is the higher number, because a multiple of cash earnings does not see the shrinking cash flow that the model builds in. The Bull needs adjusted EBITDA of $355 million against a guide of $315 million to $325 million, so it carries 20%. ## What the price already assumes At $20.70 the market value is $1,151 million and the enterprise value is $1,174 million: 3.7 times adjusted EBITDA, 7.2 times EBITDA after stock pay and capital spending, and 10.9 times my normalized owner cash. Owner cash of $99.8 million, about 8% below my $107.9 million, justifies today's price at 2% growth and a 10.5% discount rate. The market has already priced in the earnings decline and the tax normalization, and is paying for a flat-to-shrinking franchise. The shares are down 32% this year and close to the low end of a 52-week range of $17.26 to $34.49. ## How the buy price is set Confidence C calls for a margin of safety of 35% to 50%. I use 45%: 40% as the base for this grade, plus 5 points for concentration in search engines, app stores and a single advertiser category. AI substitution sits in the Bear case, tax timing sits in the cash flow, and the leverage is small (net debt is 0.07 times EBITDA), so I add nothing for them here. The maximum buy price is $21.54 times (1 minus 45%) = **$11.85**. At a 35% margin it would be $14.00. It is a decision reference, not an order to place. ## Reasons to own - **High margins and returns.** An 85.6% gross margin and a 16.6% return on invested capital, with little debt. - **Services advertising is holding.** Revenue from the largest category was flat at $241.0 million. - **New revenue lines.** AI data licensing (including local results in ChatGPT) and Hatch add revenue outside the core. - **A smaller share count.** From 82 million shares in 2018 to about 55 million. These reasons justify keeping the company on a list. They do not close the gap between $20.70 and the $11.85 I would want to pay. ## What could go wrong? - **AI intermediating local search.** Assistants and agents could answer local questions without sending people to Yelp. Clicks are already down 5%. - **Dependence on search engines and app stores.** The filing names them as sources of traffic and does not say how much. - **A shrinking restaurant, retail and other business.** Down 10% in the quarter, with restaurant closures noted in the news. - **Stock pay at 7% of revenue.** Management targets below 6% by the end of 2027. - **Selling and short interest.** The chief financial officer sells shares every month at about $20 to $23, the chief executive sold about 400,000 shares in early 2026 at $24 to $29, and 21.5% of the float is short. JP Morgan has an Underweight rating from September 2026. ## Management execution Yelp has returned a lot of cash and cut its share count, but the 2026 sequence matters more to me than the history: heavy buying near $25, then borrowing to buy Hatch at 7.7 times revenue, then stopping repurchases to repay debt. It is a sign of weak discipline in capital allocation, not a disaster, and I did not lower the verdict for it. I give management credibility 6 of 10 and capital allocation 5 of 10. ## Stock Analyza scorecard | Business quality | Points | Maximum | | --- | --- | --- | | Moat and traffic position | 14 | 20 | | Revenue durability | 10 | 20 | | Cash conversion and margins | 12 | 15 | | Balance sheet | 12 | 15 | | Capital allocation | 5 | 10 | | Management credibility | 6 | 10 | | Channel and AI risk | 4 | 10 | | Total | 63 | 100 | Business quality is a judgment, not an audited figure. The valuation score is 38 of 100: 6 of 40 for the discount to Base, 4 of 20 for protection against the Bear (50% below the price), 9 of 15 for agreement between methods, 7 of 10 for price history, 8 of 10 for what the price implies and 4 of 5 for data reliability. Business quality and valuation are separate numbers and are never blended. ## Confidence score | Component | Points of 5 | | --- | --- | | Data quality and provenance | 3 | | Model robustness | 3 | | Business predictability | 2 | | Agreement between methods | 3 | | Management and capital allocation | 3 | | Total, grade C (13 to 17) | 14 of 25 | Predictability is the weak score, because the search and AI channel and falling clicks make next year hard to call. I could not find the revolver size, rate and covenants, the tax loss balance, Google's share of traffic or Hatch's own profit. ## What I would watch from here ### Supports the thesis - Services advertising growing year on year and paying locations rising. - Adjusted EBITDA above $325 million for the year. - Stock pay falling toward 6% of revenue. ### Watch closely - Adjusted EBITDA between $315 million and $325 million, as guided. - Revenue in the third quarter near $365 million to $370 million. - Revolver balance and the timing of buybacks restarting in 2027. ### Breaks the thesis - Services advertising turning negative, or clicks falling faster than 5%. - Adjusted EBITDA below $315 million, or Hatch missing its payback. - Cash taxes rising to the full charge with no earnings growth to absorb it. The thresholds are my monitoring triggers, not company guidance. The date of the third-quarter report has been announced, and I will review the numbers when it arrives. ## The three most important thesis breakers - **Services advertising turns down.** It is the only part of the core that is holding. - **AI assistants take local discovery.** This would hit both the traffic and the multiple. - **The Hatch purchase does not pay back.** It adds debt and retention cost and leaves a smaller core. ## Stress test and independent check I rebuilt every number in a separate script: owner cash, normalized cash, the three scenarios, the sensitivity grids, the multiple conversions, the terminal value shares, the triangulation, the buy prices and the reverse valuation. They match the article. Facts come from Yelp's second-quarter 2026 release and shareholder letter and its 10-Q for the period ended June 30, 2026. Quarterly cash flow and balance sheet figures come from stockanalysis.com, and the $20.70 close of October 22 comes from Finviz. I could not confirm that price from a second source, so I cannot rule out a gap of more than 5%. The estimated inputs are the 28% tax rate, the $15 million working capital drag, remaining Hatch retention of $18 million, the Bear and Bull earnings, and all multiples and discount rates. A line in the cash flow statement for the fourth quarter of 2025 (depreciation of -$19.1 million) looks misclassified, so I did not use it. Corrections to the first look all went down, from $179.4 million to $107.9 million, so I tested the opposite direction as well. | Test | Value per share | Entry at 45% margin of safety | Effect | | --- | --- | --- | --- | | Owner cash model alone | $22.41 | $12.33 | Price above entry | | Cash earnings multiple alone | $20.23 | $11.12 | Price above entry | | Generous: owner cash 123, 9% discount, 4% growth | $33.35 | $18.34 | Price above entry | | Harsh: owner cash 90, 12% discount, no growth | $14.78 | $8.13 | Price far above entry | Even the most generous combination leaves the price 13% above the entry level. The strongest case against the Hold is that Services advertising holds, Hatch adds revenue and the shares recover toward $34, which is my Bull. The strongest case for caution is that clicks, restaurant revenue and the guide are all moving down at once, with a 74.7% gap between the price and my entry level. ## Final verdict: hold at $20.70 Yelp is a profitable, lightly indebted listings business that the market already values as flat. The headline cash flow overstates what it will earn once taxes normalize and the strong second half of 2025 drops out of the twelve-month total. **Verdict: HOLD at $20.70. Triangulated Base value $21.54 (range of the two methods $20.23 to $22.41), Confidence C (14/25), required margin of safety 45%, maximum buy price $11.85. Main thesis breaker: AI assistants and search engines taking over local discovery.** For holders this is a review, not an instruction to sell. For new money it means waiting for a price near $11.85 to $14.00, or for evidence that clicks and Services advertising have stabilized. ## More analyses on Patreon This analysis is free. Premium members get every in-depth analysis, the full archive and a vote on which stocks get analyzed next: https://www.patreon.com/stockanalyza ## Sources Primary sources are Yelp's second-quarter 2026 results release and shareholder letter and its Form 10-Q for the period ended June 30, 2026, on [SEC EDGAR](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=YELP&type=10-Q). Quarterly cash flow and balance sheet figures come from [stockanalysis.com](https://stockanalysis.com/stocks/yelp/financials/?p=quarterly). The $20.70 price is the October 22, 2026 regular session close. Per share values use 55.58 million diluted shares. The normalized tax rate, working capital drag, multiples and discount rates are analytical assumptions, not company guidance. **Disclaimer.** This analysis is provided solely for research and educational purposes. It is not personalized investment, financial, legal or tax advice. Values are estimates, not forecasts or trading instructions. Yelp depends on search engines and app stores for traffic and on local advertisers whose spending is shifting, and its cash taxes are lower than its tax charge for now. Investors can lose part or all of their invested capital. Method: Master Investment Analysis Framework v3.5. Approach: normalized owner cash discounted over five years, cross-checked with a multiple of cash earnings on the same footing, net debt counted once. Confidence: C/14. Data checks: passed with warnings. Open data gaps: revolver terms, tax loss balance, Google traffic share and Hatch profit.