Why Yelp Stock Is Climbing Today

Yelp stock is gaining in late afternoon trading on Thursday, after IAC/InterActiveCorp (IACI) proposed a takeover of Angie's List (ANGI) late afternoon on Wednesday.
By Rachel Graf ,

NEW YORK (TheStreet) -- Yelp (YELP) - Get Report stock is higher by 3.88% to $25.95 in late afternoon trading on Thursday, following a proposed merger between IAC/InterActiveCorp (IACI) and Angie's List (ANGI) on Wednesday.

Angie's List and Yelp are both review websites, but Angie's List requires a paid subscription.

Under the deal, IAC/InterActiveCorp has proposed an all-cash offer for Angie's List, but noted that it would consider a tax-free stock for stock exchange between its HomeAdvisor business and Angie's List shares. 

Additionally, in May, consumer-review website Yelp began working with Goldman Sachs to identify a potential buyer, Bloomberg reported.

Separately, TheStreet Ratings team rates YELP INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

We rate YELP INC (YELP) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and weak operating cash flow.

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

  • The revenue growth came in higher than the industry average of 15.1%. Since the same quarter one year prior, revenues rose by 40.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 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 7.55, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for YELP INC is currently very high, coming in at 84.80%. Regardless of YELP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, YELP's net profit margin of -5.62% significantly underperformed when compared to the industry average.
  • Net operating cash flow has decreased to $9.86 million or 48.23% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 56.55%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 320.00% compared to the year-earlier quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, YELP is still more expensive than most of the other companies in its industry.
  • You can view the full analysis from the report here: YELP

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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