Why Yelp Inc Shares Are Screaming Higher Today

Is this meaningful? Or just another movement?

Jun 13, 2014 at 2:37PM

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 Inc (NYSE:YELP) are trading roughly 13% higher today after news broke that Priceline.com would acquire  OpenTable (NASDAQ:OPEN) for $2.6 billion.

So what: This news seems to have little bearing on Yelp itself at first glance. Shares of OpenTable have leapt nearly 50% from yesterday's close, but there has been no such buyout chatter swirling around Yelp recently. Even after the buyout, OpenTable is still valued at less than half Yelp's market cap, which would also indicate a smaller pool of potential buyers.

Now what: Yelp and OpenTable have complementary business models -- Yelp helps users find, assess, and rate local businesses, while OpenTable is focused on booking dining reservations for users -- but they are not so similar that an acquisition of one company should lead to a bidding frenzy for the other. Yelp has also been on a tear over the past year -- even with the buyout's near-50% pop in its favor, OpenTable is still a full 100% behind Yelp's 150% gain for the past 12 months. Yelp has also been growing faster on the top line, although it's never posted positive EPS, unlike OpenTable, which has been profitable for years.

Yelp was no bargain before this deal, and it looks even more overvalued now when you compare its valuation ratios  to OpenTable's:

Valuation Ratio

OpenTable

Yelp

Price to Sales

12.5

19.0

Forward Price to Earnings

75.0

8,945

Price to Free Cash Flow

51.2

843.5

Source: YCharts. All valuations current following acquisition news.

Does this look like a screaming buy? It sure doesn't to me. I'd keep my distance until Yelp comes back to earth.

Are you ready for this $14.4 trillion revolution?
Have you ever dreamed of traveling back in time and telling your younger self to invest in Apple? Or to load up on Amazon.com at its IPO, and then just keep holding? We haven't mastered time travel, but there is a way to get out ahead of the next big thing. The secret is to find a small-cap "pure-play" and then watch as the industry -- and your company -- enjoy those same explosive returns. Our team of equity analysts has identified one stock that's ready for stunning profits with the growth of a $14.4 TRILLION industry. You can't travel back in time, but you can set up your future. Click here for the whole story in our eye-opening report.

Alex Planes has no position in any stocks mentioned. The Motley Fool recommends OpenTable, Priceline Group, and Yelp. The Motley Fool owns shares of Priceline Group. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers