Any business that can grow sales and revenue by 67% year-over-year has my attention. Add to this the number of folks who visit its website each and every month (somewhere between 106 million and 110 million per month), and we could begin to see how the company's services sparkle.
What is Yelp? What does it do? It operates Yelp.com and related mobile apps, guides that help people find places to eat, shop, drink, relax and play based on the informed opinions of a community of locals in the know.
It offers information relating to restaurants, shopping, food, nightlife, arts and entertainment, local flavor, public services and government, active life, event planning and services, hotels and travel, beauty and spas, education, health and medical, local services, home services, religious organizations, professional services, mass media, automotive, pets, financial services, and real estate. No wonder my adult children use it frequently and tell me to "move into the 21st century!"
Yelp serves customers in the United States, Canada, the United Kingdom, Ireland, France, Germany, Austria, the Netherlands, Spain, Italy, Switzerland, Finland, and Belgium. Yelp was founded in 2004 and is headquartered in San Francisco.
The company has distinguished itself with a global demographic who use its site to find reviews of just about every kind of business from hair boutiques and restaurants to chiropractors and auto repair shops. On the other hand, business owners sometimes go ballistic when they receive a negative review they believe they don't deserve.
This has apparently led to some lawsuits against Yelp. One such suit is, as I write, before the 9th U.S. Circuit Court of Appeals. Competitors of businesses who are reviewed at Yelp's site may have sometimes used it to unfairly discredit the competition.
Yelp's site is a "review site" similar to TripAdvisor.com and others. Some businesses that are reviewed are not only screaming "help!" but their fighting mad at sites like Yelp, which has been quoted as acknowledging that it has to be vigilant all the time against the increasingly sophisticated ways that some have misused it.
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.