Yelp (NYSE: YELP) has received an unexpected boost from one of the world’s valuable unicorns; Ant Financial. One of its’ key products; the Alipay digital wallet, has been integrated with a popular US online solution.
A deal will give Alipay users access to Yelp restaurant reviews in Mandarin, TechCrunch reported. Early reviews will cover only eateries in New York, Los Angeles, Las Vegas and San Francisco.
The service will automatically translate the reviews into Mandarin for Chinese tourists. Alipay launched in the United States in May, this makes the service’s third partnership with a U.S. company. Alipay is already working with Stripe and First Data.
This might allow Yelp to tap a huge market because there are 500 million Alipay users in China. Chinese visitors spent around $137 billion in the US in 2015, and that number is expected to increase by 87% or $119.19 billion by 2015, Visa reported.
Alipay boosts Yelp
Just the news of the Alipay deal boosted Yelp’s stock price. Yelp was trading at $33.22 a share on 1 August, 2017, and $40.93 a share on 10 August, 2017. The Ant Financial deal was announced on 16 August, 2017, on 17 August 2017, Yelp was trading at $42.05 a share.
Yelp’s price jumped from $40.93 a share on 8, August to $42.03 on 11 August, 2017, which will raise suspicions of insider trading. A problem here is that the U.S. insider trading laws are not effective in the People’s Republic of China where Ant Financial is based.
Are the Chinese Manipulating the US Stock Market?
This will undoubtedly raise suspicions that well-connected Chinese are trying to manipulate the U.S. stock market for their own gain. If such suspicions are true it would certainly complicated relations between the USA and the People’s Republic.
The news of the Yelp deal; and the stock’s rise in value, will also raise serious questions about the recent U.S. stock market bubble. How much of that bubble is driven by Chinese money and what will happen if Beijing suddenly turns off the faucet?
That might make President Trump; who has close connections to Wall Street titan Goldman Sachs (NYSE: GS), think twice about taking action against North Korea. It might also cause him to rewrite the battleplans for Korean War 2.0 to include the People’s Liberation Army (PLA) fighting alongside American troops.
One fascinating possibility would be US firepower smashing North Korea’s military; and the PLA overrunning the country then putting Kim Jong Un and company to the firing squad, before turning the keys over to South Korea. Then US troops would pull out of Korea entirely leaving the country to become Asia’s Finland.
During the Cold War, Finland was allowed to be free and democratic but not allowed to join NATO. That meant it was no threat to the Soviet Union, but able to avoid Communist occupation.
Yelp Needs Help
Geopolitics aside Yelp certainly needs some help. The company reported revenues of $787.22 million and a net income of $13.14 million on 30 June 2017. That is definitely a vast improvement from the -$45.31 million in net income reported on 30 June 2017 but it still leaves Yelp a minuscule niche player.
Its resources are certainly minimal on 30 June 2017 they included:
- $970.12 million in assets, small but a significant increase over the $799.80 million reported on the same date in 2016.
- A free cash flow of $29.64 million.
- $156.71 million in cash from operations up from $60.21 million a year earlier.
- $511.80 million in cash and short-term operations, a definite improvement over the $398.10 million reported 12 months before.
- $41.02 million in cash from financing – one has to wonder if this figure includes private capital investment from Ant Financial.
- A market capitalization of $3.439 billion on 17 August 2017.
- An enterprise value of $2.922 billion on 17 August 2017.
- $157.89 billion in revenue growth over the 12 months between June 2016 and June 2017. Yelp reported revenues of $629.33 million on 30 June 2016.
Is Yelp a Value Investment?
All those figures make Yelp a very good investment for Ant Financial because it will help drive more business to Alipay in the USA.
Since Yelp attracts an estimated 142 million users a month – it might put Alipay before 142 million potential users in the United States and elsewhere. The solution would be to add an Alipay digital wallet to every Yelp business page. This might be an important revenue stream for Ant by getting middle class Americans; who certainly have more disposable income than Chinese workers, to use Alipay.
Will Yelp and Alipay Come to Walmart Next?
This would certainly help Alipay in its sneaky American expansion by getting into Main Streets and strip malls across the country. The next major step would be getting into a U.S. retailer such as Walmart (NYSE: WMT).
Since Walmart already takes QR code payment solutions like Alipay that is highly probable. The big-box giant is also offering its own Quick Read (QR) code solution Walmart Pay.
QR code wallets are theoretically more secure than near field communications (NFC) solutions; like Apple Pay, because they do not use a Wi-Fi signal to communicate with cash registers. Instead QR code uses a phone’s camera to scan a unique barcode which provides an extra layer of security.
A next logical step would be to add Walmart Pay to Yelp and integrate Walmart Pay and Alipay. That would give Ant the cover of an all-American brand for its US expansion. One has to wonder if Ant Financial will buy Yelp at some point.
Yelp then would be a great investment for Ant Financial; or Walmart, but a lousy investment for you because it is overpriced and makes little money. Although working with Yelp proves claims that Ant Financial is the world’s most value unicorn (pre-IPO company) and justifies the $70 million valuations for it. Smart investors should forget about Yelp and wait for Ant’s initial public offering (IPO) because Ant will be a value investment.