Shares were falling 10.8% in mid Thursday trading, having last traded at $67.42.
Second quarter revenue grew 61.4% year-over-year to $88.8 million, beating the consensus estimate of $86.3 million. For the first time, Yelp, a business review site, had a profitable quarter, earning 4 cents per share, up from a 1 cent loss per share a year earlier; analysts polled by Thomson Reuters expected the company to lose 3 cents per share this quarter. Year-over-year, reviews increased 44% to 61 million, monthly unique visitors rose 27% to 138 million, and monthly unique mobile visitors grew 61% to 68 million.
Despite these successful results, Yelp has struggled to expand its reach. It launched websites in Japan and Argentina this year and opened its European headquarters in Dublin. This quarter, Yelp’s active local business accounts rose 55% year-over-year to about 79,900, but the roughly 5,900 added businesses was short of some analysts’ expectations. The unexpected profit was not enough to outweigh investors’ concerns and sent the stock falling.
Here’s what some analysts on Wall Street had to say:
Piper Jaffray analyst Gene Munster (Overweight, $90 PT)
“Yelp's strong Q2 report reaffirms our thesis that the company can continue to post solid quarter upside plus slight guidance raises as the business continues to expand. While the valuation has increased meaningfully over the past month, we believe social network stocks have entered a period of momentum and see little near term reason for that to change specifically for YELP. Additionally, while we had concerns in the past that competition could ultimately hurt Yelp, we continue to believe our checks on Yelp's reviews vs. Google give us confidence that Yelp's competitive moat is strong.”