Why Yelp Shares Tanked

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 Yelp (NYSE: YELP  ) tanked today by as much as 12% after the company announced third-quarter results.

So what: Revenue in the third quarter came in better than expected, with the online-review specialist bringing in $36.4 million. That translated into a net loss of $2 million, or $0.03 per share. That bottom line was also slightly ahead of the $0.04 per share loss that analysts were expecting.

Now what: Investors might have been looking for a little more from fourth-quarter guidance, which calls for revenue in the range of $40 million to $40.5 million, which would be growth of around 62%. Near-term margins may also be under pressure due to the acquisition of Qype. Yelp had preannounced preliminary figures last week, so it seems investors were focusing more on guidance and were left wanting more.

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

Evan Niu, CFA, has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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 Motley Fool has a disclosure policy.

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  • Report this Comment On November 05, 2012, at 3:13 PM, hilsonvalli wrote:

    It's the valuation, silly. YELP would have to grow revenues about 10X just to equal _today's_ valuation. Not only unlikely, impossible.

    And this business will apparently bleed money forever, especially with growth slowing and expenses climbing.

  • Report this Comment On November 06, 2012, at 5:33 AM, Tayloraccount wrote:

    If you owned a company that failed to make a profit for 8 years, your spouse, relatives, friends, and just about everyone else would tell you to get a job.

    And such is true with yelp.

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