Yelp (YELP) Plummets as Market Sell-Off Fears Peak

NEW YORK (TheStreet) -- Yelp (YELP) plummeted 8.8% to $63.78 as of 12:50 p.m. New York time. The online reviews site has traded between $62.75 and $70.93, after opening the day at $70.10. Trading volume has exceeded the three-month daily average of 3.53 million, with 4.55 million shares having changed hands. The company is lagging the S&P 500 which is down 0.55%.

The year's biggest gainers -- primarily Internet and technology stocks, Yelp among them -- are plunging on investor fear over current political uncertainty in Washington. The government shutdown, stretching into its eighth day, is a result of a stalemate among Congressional leaders to agree on a new budget. The fears also stem from concerns the government will default on its debt obligations if it doesn't raise the debt ceiling by Oct. 17.

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 solid stock price performance. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

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

  • YELP's very impressive revenue growth greatly exceeded the industry average of 22.7%. Since the same quarter one year prior, revenues leaped by 68.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the 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 4.99, which clearly demonstrates the ability to cover short-term cash needs.
  • YELP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, YELP INC reported poor results of -30 cents a share vs. -15 cents a share in the prior year. This year, the market expects an improvement in earnings (-10 cents vs. -30 cents).
  • 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 92.7%. 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 -1.59% significantly underperformed when compared to the industry average.

Written by Keris Alison Lahiff.

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