The note suggests that the online review site's high unique global user numbers, coupled with its low domestic share of the online ad market, means that it has plenty of room to grow. Additionally, the fact that it is at the cutting edge of three online growth trends -- mobile, social and local -- means that analysts at JMP see large upside for the San Francisco-based company.
"Yelp is at the center of three transformational trends across the Internet-Mobile, Social, and Local-and we believe these trends will continue to provide a tailwind for the company" JMP Securities said, "given the large global market opportunity, evolution further down the transaction funnel, and significant consumer scale, we are buyers of the stock and recommend taking advantage of the 15% pullback in shares, based on Friday's close."
Yelp was up 3.21% to $86.11 shortly after market open.
Must Read: Warren Buffett's 10 Favorite Stocks
Separately, 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 93.03%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -2.92% is in-line with the industry average.
- 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 14.32, which clearly demonstrates the ability to cover short-term cash needs.
- This stock has increased by 249.54% 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.
- YELP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, YELP INC continued to lose money by earning -$0.16 versus -$0.30 in the prior year. This year, the market expects an improvement in earnings (-$0.04 versus -$0.16).
- You can view the full analysis from the report here: YELP Ratings Report