Yelp stock soars after upbeat 2Q results, outlook

AP News
Posted: Aug 02, 2012 1:36 PM
Yelp stock soars after upbeat 2Q results, outlook

NEW YORK (AP) — Shares of Yelp Inc. got a five-star rating from investors Thursday after the online reviews site's second-quarter results showed that it is gaining new users overseas and through mobile devices.

THE SPARK: Yelp on Wednesday reported a smaller net loss and nearly 7 percent higher revenue than Wall Street had predicted. Revenue jumped 67 percent to $32.7 million.

Yelp also gave a forecast for revenue for the current quarter that was slightly better — as much as 3 percent — than analysts, on average, expected.

The company said it launched in eight new markets in the second quarter — in Madison, Wis., as well as Denmark, Finland and others, and said it plans to expand further. It also opened an ad sales office in London during the quarter.

ANALYSIS: Citi Investment Research analyst Mark Mahaney said the sources of the quarter's strength were local and brand advertisements, which contributed more to revenue than he had expected. Local ads — from the restaurants and shops that are reviewed on Yelp — make up the bulk of the company's revenue.

Mahaney kept a "Neutral" rating and a target price of $28 on Yelp's stock.

WHY IT MATTERS: Yelp's results show that not all of the new Internet and social media stocks are created equal and they won't necessarily trade in tandem. Zynga Inc., the online game maker, and social network Facebook Inc. are trading at their lowest levels since going public following tepid earnings reports.

SHARE ACTION: Up $3.10, or 16 percent, to $21.92 in afternoon trading. Yelp, which went public in March, is up 54 percent from its IPO price of $15.