Yelp shares tank on scathing reviews for company’s results


The reviews are in, and they are giving zero stars to Yelp.

The San Francisco-based online review and recommendation company watched its shares plummet as much as 32 percent Friday, to as low as $29.33, following what could only be called a disappointing quarterly earnings report and outlook. Late Thursday, Yelp said that it added no net new advertising customers during its third quarter, as the company saw the effects of a change in the kinds of contracts it offers.

UBS analyst Eric Sheridan said in a research report that Yelp’s results show “key debates on (its) business transition and (management) execution” are likely to come to the forefront of investors’ concerns about where Yelp stands in the market for local-based online advertising, in particular.

“Unlike last quarter, which hit all the upside high points in the transition, we think investors now will place Yelp squarely back into the ‘show me’ camp,” Sheridan said. Sheridan, who has a sell rating on Yelp’s stock, slashed his price target on the company’s shares to $28 from $39.

Earlier this year, Yelp switched to offering local advertisers contracts without any set term lengths from its prior method of signing up customers to long-term ad deals. The switch resulted in a high rate of cancelled contracts by Yelp’s customers.

Yelp said that during its third quarter, it earned 17 cents a share, which topped analysts’ forecasts for a profit of 10 cents a share, but its sales of $241 million failed to meet Wall Street’s expectations for $245 million in revenue.

And, due in part to the matter of contract cancellations, Yelp also slashed its full-year revenue outlook to a range of $938 million to $942 million, down from an earlier forecast of $952 million to $967 million.

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Source:: The Mercury News – Business

      

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