Yelp has had its ups and downs recently. First there was the contretemps with Google when the search engine giant used Yelp as an example of why Google was not violating European antitrust rules. According to Google, some 40% of visitors to Yelp come directly from Yelp’s mobile app. Yelp claimed that was “absurdly inaccurate” and that even though the company once said that 40% of its searches were accomplished on Yelp’s own mobile app, that number has nothing to do with the source of Yelp’s traffic.
Some good news did arrive last week, though, when a U.S. District Court tossed a complaint against the company that claimed Yelp had lied to shareholders about the reliability of its consumer reviews.
Headline risk remains, though, as a documentary film is apparently in production that accuses the company of demanding payment (in advertising dollars) in exchange for positive reviews. The company has denied the allegations.
In late February, analysts at Brean Capital raised the firm’s rating on Yelp from Hold to Buy with a $50 price target. Northland Securities maintained a Market Perform rated, although it lowered its price target from $55 to $49, and Credit Suisse reiterated its Outperform rating and $71 price target. Earlier this week RBC Capital reiterated its Outperform rating and $82 price target.
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Yelp’s bulls see big growth in local revenues that could lead to takeover interest from some larger social media players. Yelp’s market cap is a relatively modest $3.8 billion, while its forward multiple is north of 89 and its price-to-book ratio is 6.35. If the company’s user base continues to grow, even at a slower pace, and it can overcome the negative headlines, it could indeed be a nice takeover target.
Shares traded down about 0.6% at $50.91 in the noon hour Wednesday. The stock’s 52-week range is $42.10 to $86.88, and the consensus price target is $66.14.
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