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Why Yelp Inc. Shares Might Climb to $85

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While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Yelp  (NYSE: YELP  ) climbed about 2% in pre-market trading Tuesday after SunTrust Robinson Humphrey upgraded the consumer-review website from neutral to buy.

So what: Along with the upgrade, analyst Robert Peck planted a price target of $85 (from $100), representing about 29% worth of upside to yesterday's close. So while momentum traders might be turned off by Yelp's sharp pullback over the past month, Peck's call could reflect a growing sense on Wall Street that the fears surrounding its growth trajectory are becoming overblown.

Now what: According to SunTrust, Yelp's risk/reward trade-off is rather attractive at this point. "We believe there are also two company specific issues contributing (at the margin) to relative underperformance in the past month: 1) recent negative headlines, regarding FTC complaints and a somewhat related VA Supreme Court case; and 2) weak international traffic data," said Peck. "On the first item, we see little if any impact to the business/financials and offer a thorough walk-through in this report. On the second item, we flagged international expectations as perhaps too high in our initiation and view a right sizing of sentiment as healthy." When you couple that balanced perspective with Yelp's share-price weakness of late -- off about 35% from its 52-week high -- it's pretty tough to disagree with SunTrust's upgrade. 

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  • Report this Comment On April 27, 2014, at 3:11 PM, DavidSilver21 wrote:

    YELP is bankrupt and will never make a profit. Search Google "yelp scam", "yelp extortion" , "yelp mafia" and see over three million results. Any small business man with a smartphone recognizes extortion and mafia tactics when YELP! calls. jeremy stoppelman is a master lair and con-man. He sells his yelp stock as soon as he can because it is worthless. Only 67k active advertisers with 55M business listings. 10 years in business and NO EARNINGS. WOW!! That is impressive! Every small businessman HATES YELP with a passion. GET OUT OF THE STOCK NOW

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Brian Pacampara

I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

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Related Tickers

9/1/2015 10:09 AM
YELP $23.76 Down -0.52 -2.14%
Yelp CAPS Rating: **