Cashtaggers on StockTwits.com say investors want more proof from social networking companies that real earnings will soon justify market caps. And they're unlikely to get that proof from Yelp as the company continues to spend aggressively to grow its business. Yelp currently trades at 152 times expected 2015 earnings.
Analysts predict that Yelp will post a loss of 6 cents per share for the first three months of the year on $75.1 million in revenues, according to consensus estimates on Yahoo Finance.
Yelp fell 4.7% by 1:30 p.m. on the back of Twitter's disappointing quarterly report. Though Twitter's flat non-GAAP earnings beat expectations, investors were troubled by its slow user growth.
Some investors argue that Yelp should not have suffered so much from Twitter's problems. They said Twitter's user growth issue is specific to the micro-blogging site and has little relation to Yelp's relevance.
Certainly, the Yelp bears have been wrong before. Last quarter, Yelp met EPS expectations and beat on revenues. The stock closed up nearly 19% the following day. Some investors believe Yelp shares could rise 14% if it beats expectations tonight.