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TheStreet Open House

Why Yelp (YELP) Stock Is Up Today

NEW YORK (TheStreet) -- Yelp (YELP) was gaining 8.3% to $75.72 Wednesday after Stifel Nicolaus initiated coverage of the stock with a “buy” rating.

The analyst firm set a price target of $85 for the company. Yelp recently revamped its product and increased quality standards according to Stifel Nicolaus analyst Scott Devitt. Devitt also noted that Yelp is significantly expanding into local advertising.

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TheStreet Ratings team rates YELP INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate YELP INC (YELP) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The area that we feel has been the company's primary weakness has been its disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Internet Software & Services industry and the overall market, YELP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for YELP INC is currently very high, coming in at 93.42%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, YELP's net profit margin of 3.08% significantly trails the industry average.
  • Net operating cash flow has significantly increased by 101.70% to $10.67 million when compared to the same quarter last year. In addition, YELP INC has also vastly surpassed the industry average cash flow growth rate of 17.69%.
  • YELP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 14.76, which clearly demonstrates the ability to cover short-term cash needs.
  • This stock has increased by 31.75% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in YELP do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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