Why Yelp's in Pain Today

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  ) fell as much as 10% in early trading, before settling into a roughly 5% loss in a volatile reaction to the company's underwhelming earnings report.

So what: Yelp's fourth-quarter revenue beat the Street's estimates, $41.2 million against $40.3 million. However, the company lost $0.08 per share, which was much worse than the $0.01 per share loss analysts had forecast. Yelp's first-quarter revenue guidance of $210 million to $212 million in revenue, ahead of the $207.3 million consensus, failed to assuage skittish investors worried over the quarterly loss.

Yelp reported adjusted EBITDA of $1.8 million for the quarter, which is an improvement over the year-ago quarter's narrow loss. Local revenue nearly doubled, growing 87% to $33.9 million, while no other segment posted similar increases. However, sales and marketing costs are up 59.3% year over year, and product development costs increased 97.5%. The company now expects first-quarter revenue of $44 million to $44.5 million with adjusted EBITDA of $1.3 million to $1.5 million. For the full year, the company anticipates $210 million to $212 million in revenue and adjusted EBITDA of $20 million to $22 million.

Now what: Yelp may be growing its revenue quickly, but investors aren't satisfied that the company has staked out its claim beyond the reach of potential competitors. It also happens to be very expensive based on its projections -- even if Yelp were to make every cent of adjusted EBITDA into GAAP net income, it would only wind up with a 61 P/E. This volatile stock might be fun for short-term traders, but long-term investors can probably find better options.

Want more news and updates? Add Yelp to your watchlist now.

2013 and beyond
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2243166, ~/Articles/ArticleHandler.aspx, 9/23/2014 2:24:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement