Shares of Yelp Inc. (NYSE: YELP) exploded Thursday afternoon on rumors that the company may be pursuing a sale. The first to report on this was The Wall Street Journal. While this could have huge implications for whatever company would be acquiring Yelp, the issue of valuation and history has to at least be considered here.

Within the past couple of weeks Yelp reported its first quarter financial results. The local business review guide company posted a diluted earnings per share (EPS) loss of $0.02 on revenues of $118.5 million. In the first quarter of 2014, Yelp reported an EPS loss of $0.04 on revenues of $76.41 million. The Thomson Reuters estimates for the first quarter called for EPS of $0.01 and $119.98 million in revenue.

Average monthly mobile unique visitors grew 29% year over year to approximately 79 million and average monthly desktop unique visitors declined 3% year over year to approximately 80 million. Average monthly unique visitors (desktop and mobile web) grew 8% year over year to approximately 142 million.

Looking ahead to the second quarter, Yelp guided revenue in a range of $131 million to $134 million and adjusted EBITDA in a range of $22 million to $24 million. Full-year guidance was affirmed: net revenues in a range of $574 million to $579 million and adjusted EBITDA in the range of $102 to $105 million.

Compared to Wednesday’s closing price ($38.22), shares of Yelp have traded at a P/E multiple just shy of 300-times its 2015 expected earnings. The stock trades at a 76-times multiple of its 2016 expected earnings. With a $3.4 billion market cap, after the pop in the stock, there simply has to be a question of which company would really want to own Yelp. At least, at a price that shareholders might not balk.

The stock has a consensus analyst price target of $56.11 implying an upside of 22% from current prices. The highest target from analysts is $79, implying an upside of 72% — although the targets were moved handily lower after the last earnings report.

Prior to this rumor a few analysts had made calls on Yelp:

• Piper Jaffray reiterated an Overweight rating with a $70 price target
• B. Riley reiterated a Sell rating with a $36.50 price target
• Brean Capital reiterated a Buy rating with a $58 price target
• Barclays has an Overweight rating but lowered its price target to $50 from $75
• Citigroup has a Buy rating and lowered its price target to $54 from $67

Thursday afternoon, shares of Yelp were up 20% at $45.84 on a 52-week trading range of $37.91 to $86.88. So far on the day over 18 million shares have moved on the news.

If Yelp already gave disappointing numbers that hurt the stock so much, and if it valued at such a high market premium, why would the company putting itself up for potential sale not concern at least some of the skeptical investors who might be wondering what this says about the core business ahead? Should a standalone Yelp still be worth 300 times expected earnings?

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