Yelp's results get rave reviews

Plenty of positive metrics -- and strong business momentum -- overcame a miss on EPS, propelling the stock upward.

By Jonathan Berr May 3, 2013 9:55AM
Shares of Yelp (YELP) leaped Thursday after investors gave a thumbs up the San Francisco company's improving financial picture. The online review site posted a net loss in the first quarter of $4.8 million, or 8 cents per share, an improvement over the loss of $9.8 million, or 31 cents, a year earlier. Revenue surged 68% to $46.1 million.
Though the earnings were worse than the 6-cent loss analysts expected, the revenue figure exceeded the $44.6 million consensus forecast.

And Yelp reported lots of other metrics that investors liked. Average monthly visitors to the site surged 43% year-over-year to about 102 million, a record. The number of reviews hit 39 million in the quarter, a 42% increase. Active local business accounts rose 63% to about 45,000. The company estimates that its mobile app was used on approximately 10 million unique mobile devices on a monthly average basis in the quarter.
 
That's not too shabby for a company that two former PayPal engineers started in 2004 and that went public in 2011. Its shares have skyrocketed more than 60% since the start of this year.   CEO and co-founder Jeremy Stoppelman, not surprisingly, sees better times ahead.

Two women sharing a meal at a diner © Cultura Limited, Superstock"Consumers are also doing more than just reading reviews of local businesses on Yelp," he said during the recent earnings conference call. "They're following through and making contact with businesses via check-ins, reservations, clicks to their website, phone calls and directions."

Yelp got some odd publicity recently amid reports that prisoners were reviewing their jails on the site. But on a more serious note, Yelp faces tough competition from Facebook (FB), which recently began allowing users to mine its site for recommendations from their friends, and from Google’s (GOOG) Zagat service among others. These rivals may buy Yelp one day or grind it into submission. It's tough to say.

Meanwhile, investor sentiment on Yelp has turned up. Over the past 52 weeks, its share price has ranged from $14.10 to $30.90. The stock isn't cheap, trading at 237.95 times estimated 2013 earnings. However, it does offer the potential for huge growth. Revenue in the current quarter is expected to surge 62.8%, and analysts expect the company to be profitable next year.

In any case, investors who are in a speculative mindset should consider adding the shares -- but be prepared for a bumpy ride. The stock may be volatile for some time.
6Comments
May 3, 2013 12:14PM
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Yelp is a joke... Most reviews are negative. Usually only people with an axe to grind will take the time to post a review.
May 3, 2013 1:04PM
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Yelp is a scam. They use a non explainable filter to remove reviews. They have done it to me when reviewing several places. Most people do not know of the filtered reviews and these do not count towards the places star rating. Most people do only take the time to review if they had an extremely good interaction or a negative reaction to the place of business. So it is not a true evaluation as most of the reviews are knee jerk reactions. I feel that the filter is somehow done to improve star ratings for client that pay Yelp for services. One place has a 4 star rating because almost all of the negative reviews have been filtered.
May 3, 2013 1:45PM
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Yelp has filtered all of our companys 5 Star reviews and are now only showing the very few bad reviews. We are not a paying customer, so this EXTORION is allowed!!! It is ethically wrong. I even heard the LA BBB was shut down and fined for taking bribes from Yelp. The latest  revirew from the same customer was a review about a 3rd party company that is calling our customer. Not us, but the affiliate to the product he purchased from us. The customer (who used a false name) threatened, on Yelp, to update our reviews and keep knocking our ratings down every time the other company calls him. He even signed an acknowledgement that the product that he purchased was equipped with this option and that he would get calls and emails from them. I emailed Yelp and they sent back this canned reply:

 

MAY 02, 2013  |  10:51AM PDT

Hi there,

Thanks for contacting us.

We’ve looked at Christopher A's review of *****, and we have elected to leave it intact. We understand it can be frustrating to receive a negative review, and that you are disputing some of the user's statements, however Yelp does not take sides in factual disputes. If a review appears to reflect a user's personal experience and opinions, it is our policy to leave it intact.

Regards,
Fritz
Yelp User Support
San Francisco, California

Yelp Official Blog |
Yelp Frequently Asked Questions |
Yelp for Business Owners |

For your reference this is Case #: 458

[[c37502414cd6aaa75509a44e58abee97d4aca123
May 3, 2013 1:15PM
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I agree, our company has been trashed several times, signed by people who we have never
had as clients!  We suspect it's done by competitors.
May 3, 2013 4:14PM
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Hey, theStreet.com is having an open house this weekend and all their products are free. Check it out
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