Why Yelp (YELP) Stock Is Lower Today

NEW YORK (TheStreet) --Yelp Inc.  (YELP) is down -7.31% to $65.45 Friday, continuing a two day fall beginning on April 2, when the Wall Street Journal reported that the Federal Trade Commission disclosed over 2,000 complaints against the business review website in response to a Freedom of Information Act request made by the Journal.

The company is now facing a scandal alleging they posted only negative reviews for businesses that did not purchase advertisements on their site. 

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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 few notable weaknesses, 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.
  • Net operating cash flow has significantly increased by 472.37% to $9.32 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 11.73%.
  • 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 16.45, which clearly demonstrates the ability to cover short-term cash needs.
  • This stock has increased by 229.59% 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.
  • You can view the full analysis from the report here: YELP Ratings Report

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