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TheStreet Open House

Review: Yelp Will Get Your Feet Back on the Ground

Stocks in this article: YELPCSGOOGAAPL

You can listen to a replay webcast of a Credit Suisse (CS) technology conference from Dec. 3, and hear a live webcast from the Cantor Fitzgerald Internet conference on Dec. 11by going to Yelp's Investor Relations web page. I'm fairly confident the leadership will be commenting about the problems associated with running a review site including business owners who write up glowing reviews about their own businesses.

What Yelp writes about itself is informative and relatively laconic: "The information these reviews provide is valuable for consumers and businesses alike. Approximately 117 million unique visitors used our website, and our mobile application was used on approximately 11.2 million unique mobile devices, on a monthly average basis during the quarter ended Sept. 30, 2013. Businesses, both small and large, use our platform to engage with consumers at the critical moment when they are deciding where to spend their money."

From a financial perspective, Yelp's efforts have paid off nicely for itself and it's shareholder. Shares are up 357% so far over the past 52 weeks, yet the share price has simmered down from the 52-week high of $75.37 a share on Oct.21, 2013. Even so, at $63 per share, the forward (1-year) PE ratio is around 335, a very rich multiple for any company, especially one that has had negative earnings-per-share (EPS) so far this year.

The analyst community that covers Yelp estimates that in the current quarter, sales growth and revenue will increase on average by 63% and in the first quarter of 2014, revenue will increase by another 58%. The same analysts are predicting YELP will be profitable in the EPS department sometime in 2014, and that hope is most likely "baked in the cake" of YELP shares.

The average estimate for 2013 is for Yelp's revenue and sales to exceed $229 million as a result of driving traffic and advertising its direction. The big challenge for the company appears to be answering accusations that it allows reviews to be posted on its site without verifying the validity or identity of the poster.

Google (GOOG) is a direct competitor, but it appears that Yelp has a deal with Google's biggest rival, Apple (AAPL) that somehow drives potential visitors and users to Yelp for the kind of help that review sites are supposed to offer.

Anecdotally, my adult children don't have any negative comments about Yelp. They tell me that Yelp's most prolific reviewers are called "Elite Yelpers" who consistently go above and beyond to write impartial reviews and participate in the YELP online forum.

If you decide to buy shares, buy the dips and by all means use a stealth trailing stop loss alert system that helps protect from catastrophic losses. The one I use is called TradeStops and as its site prudently reminds us, "Successful trading requires careful thought and planning along each step of the way. You have to know what your overall goals are, which stocks are right for you to buy, and how much of each stock to buy."

Whether you're trading shares of YELP, GOOG or even APPL, those are the kind of realistic words of wisdom that investors and traders thrive or dive with on every investment and trade. Yell "help" if you need good investment disciplines, and yell "YELP" if you need to find a good restaurant or a friendly hair salon.

At the time of publication the author had positions in GOOG and APPL, but none of the other stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of www.ChecktheMarkets.com.

Courtenay holds a Master's of Science degree in Psychology from California Polytechnic State University, and is a former senior vice-president of Investments for two major brokerage firms. He's been a fiercely independent investment "investigator" and a consulting contributor to the investment publishing world for over 30 years. In addition to his role as an investment publisher and analyst, he serves as a marketing consultant to the investment media industries.

In his role as a financial editor, he specializes in unique investment strategies, overlooked stock investments, energy and resource companies, precious metals, emerging growth companies, the prudent use of option strategies,real estate related opportunities,wealth preservation, money-saving offers, risk management, tax issues, as well as "the psychology of investing". Because of his training and background in Clinical Counseling and Psychology, he enjoys writing about investor behavior, the ¿herd mentality, how to turn investment mistakes into investment breakthroughs and the stock market's behavioral trends and patterns.
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