What happened

Shares of Yelp Inc. (NYSE:YELP) were down 13.1% as of 1:30 p.m. EST Friday, after the local business review specialist released strong fourth-quarter 2016 results, but followed with disappointing guidance.

So what

Quarterly revenue climbed 26.7% year over year, to $194.8 million, while adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) grew 158.9%, to $45.3 million. On the bottom line, adjusted net income rose 151.1%, to $22.6 million, and adjusted net income per share grew 145.5%, to $0.27. By comparison, these results compared favorably to Yelp's most recent financial guidance, which called for fourth-quarter revenue of $191 million to $195 million, and adjusted EBITDA of $36 million to $40 million.

Yelp logo

IMAGE SOURCE: YELP, INC.

Yelp co-founder and CEO Jeremy Stoppelman called 2016 an "outstanding" year for his company, adding, "In 2017, we look forward to increasing engagement on the app, expanding transactions and broadening our sales strategy."

Now what

However, Yelp also issued guidance for first-quarter 2017 revenue of $195 million to $199 million, representing growth of 25% at the midpoint but falling well below the $204.4 million investors were anticipating. Yelp also expects first-quarter adjusted EBITDA of $25 million to $28 million.

Similarly, Yelp expects full-year 2017 revenue of $880 million to $900 million -- up 25% at the midpoint from 2016 -- with adjusted EBITDA growth of 30%, at the midpoint of its $150 million to $165 million range. Analysts, on average, were looking for 2017 revenue near the high end of Yelp's expected range.

To be fair, Yelp is rightly pleased with its performance in the fourth quarter and the full year of 2016. Assuming it's not under-promising with the intention of once again over-delivering in 2017, the company is also still targeting healthy growth rates for the coming year. But with shares still up more than 135% over the past year as of this writing (even after today's drop), it's obvious the market wanted more. And it's no surprise to see investors taking some of their recent gains off the table.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Yelp. The Motley Fool has a disclosure policy.