Yelp's Upcoming Earnings Unlikely to Undo Twitter Damage

NEW YORK ( TheStreet) -- Investors banking on Yelp's  ( YELP) earnings to undo some of Twitter's ( TWTR) damage to the social networking sector may want to look elsewhere. 

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.

Feels like $YELP is going to get crushed, not a lot of shorts are going to feel the pressure to cover after $TWTR now

- Jean Fonteneau (@JFinDallas) Apr. 30 at 09:44 AM

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.

funny to see $YELP down 4% on $TWTR news.. time to buy?

- Mark Holder (@StoneFoxCapital) Apr. 30 at 09:45 AM

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.

$YELP exacting price movement 14% after Earnings as per this website. http://stks.co/q0GVI

- Hiral Ghelani (@Hg5096) Apr. 30 at 11:59 AM

But others say there is simply too much risk to warrant buying in given the stock's downward trajectory in the past couple months. The stock has fallen nearly 40% since March 4 highs.

$YELP is pricing in a big options move, but oddly enough, I'm just not seeing good opportunities. Too much risk there. Moving on.

- Haki Hika (@hakihika) Apr. 30 at 12:01 PM

$YELP I think yelp investors are bullish on yelp into earnings but doesn't want to take on risk. don't blame them.

- Donny (@PowerUp) Apr. 30 at 10:27 AM  

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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