Yelp shares plunge as reviews of its business cause investors to choke

Yelp? Welp, on Wednesday, GULP was more like it.

It was that kind of day for Yelp, the San Francisco-based online provider of business reviews, recommendations, and also owner of food-delivery service Eat24. Investors wasted little time putting in their reviews on Yelp as they drove the company’s shares down by more than 18 percent, to $28.32.

That’s what happened after Yelp gave an earnings report and outlook that, at least on Wall Street, was worth maybe half a star.

Late Tuesday, Yelp reported first-quarter revenue of $197.3 million, which fell short of analysts’ expectations of $198.1 million. Yelp blamed the shortfall on local advertisers fleeing its site during January and February, and the company sure doesn’t seem to think those ad buyers will be coming back any time soon.

That’s because Yelp also cut its full-year revenue outlook to a range of $850 million to $865 million. And that reduction came after the company lowered its sales forecast to $880 million to $890 million in February. Prior to all of that, Yelp had said it expected sales this year to reach $1 billion.

Analysts said there’s no big secret as to what’s wrong with Yelp: Advertisers are ditching it for bigger (and, maybe even better?) platforms to reach customers — such as Google, Facebook and TripAdvisor. Mark Mahaney, of RBC Capital Markets, cut his rating on Yelp to sector perform (Tranlastion: neutral) from outperform, or buy following the company’s report and outlook.

“We got this wrong. Flat out,” Mahaney said. He also took his price target on Yelp’s stock down to $27 a share from $49.

And based on what Yelp’s many investors did with their stock on Wednesday, the company is “flat out” in trouble.

Photo: Yelp offices in San Francisco in 2015. Yelp shares fell more than 18 percent Wednesday after the company gave a disappointing quarterly report and outlook. (Bay Area News Group archives)

 

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  • tom nguyen

    There is 2 ways in making money and profit, good and evil, Yelp is the evil one.

 
 
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