Why Yelp Shares Soared

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of customer reviews website Yelp (NYSE: YELP  ) screamed 17% higher today after its quarterly results and outlook topped Wall Street expectations.

So what: The stock has been under pressure in recent weeks as weak results from social media stocks Facebook and Zynga triggered fears over the space, but a clear second-quarter beat -- EPS loss of just $0.03 versus the consensus loss of $0.06 -- coupled with upbeat guidance for the full year eases those concerns. Management cited expansion into new markets and new partnerships for the strong growth in users, prompting several analysts to raise their price targets on the stock.

Now what: Management now sees full-year revenue of $135 million-$136 million, up from its prior view of $128 million-$132 million. "We are now active in 90 Yelp markets around the world and we believe there are more than 1,000 cities like these, leaving ample room to continue launching in these markets," CEO Jeremy Stoppelman said. But while Yelp's revenue growth is certainly impressive, the business model remains too volatile, unproven, and unprofitable for average investors to take a long-term position in.

Interested in more info on Yelp? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Facebook. Motley Fool newsletter services have recommended buying shares of Facebook. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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10/21/2016 4:00 PM
YELP $33.40 Down -0.95 -2.77%
Yelp CAPS Rating: **