Why Yelp Inc. Stock Plunged 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  ) dropped by as much as 10% Tuesday amid a broader pullback in the tech sector.

So what: With no big company-specific news today, it's worth noting Yelp had already risen nearly 35% since early May. It's unsurprising, then, that the local business search specialist fell harder than most as the tech-heavy NASDAQ Composite Index simultaneously dropped by nearly 1.8% during Tuesday's intraday trading. 

Now what: For perspective, Yelp's recent lows came after a shareholder rights firm launched an investigation into whether it had violated federal securities laws with potentially misleading statements involving the accuracy of its reviews, Yelp's processes in screening potentially unreliable reviews, and "certain undisclosed business practices" surrounding the suppression of such reviews. Nonetheless, investors took advantage of the pullback to buy shares, especially after evidence surfaced that Yelp was continuing to grab more market share in the multibillion-dollar mobile search market -- and despite well-funded, big-name competition in the space.

That's not to say Yelp looks cheap; shares currently trade around 220 times next year's expected earnings and nearly 21 times trailing 12-month sales. But if Yelp can continue its impressive growth as it shuffles for a larger slice of its burgeoning target market, the stock could certainly continue rewarding investors from here.

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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!

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