NEW YORK (TheStreet) -- Shares of Yelp Inc (YELP) are down 4.66% to $44.64 on heavy volume in afternoon trading Thursday, as a production company seeks funding to complete a feature length documentary examining the online review company's business practices.
The documentary, "Billion Dollar Bully" is based on claims of extortion, review manipulation and review fabrication on Yelp's review platform.
It features business owners who tell their personal stories of Yelp's questionable business dealings.
Henry Schwartz, president of Trade Alert and a member of TheStreet's Options Profits Team says, "Bearish options flow in YELP has been detected, with contracts trading 6.2X average daily volume, on reports of an upcoming documentary that will cast the company in a negative light."
"Funds for the film are apparently being raised on Kickstarter, according to Briefing. March 45 puts, which expire tomorrow, are the most active series for the day," he added.
About 6.41 million shares of Yelp have exchanged hands as of 2:32 p.m. ET today, compared to its average trading volume of about 3.94 million shares a day.
San Francisco, CA-based Yelp is a website for reviews that provides local businesses with a range of free and paid services, helping them engage with consumers.
The company's users having contributed a total of about 36 million reviews of various businesses including restaurants, boutiques and salons to dentists, mechanics and plumbers on its platform.
Separately, TheStreet Ratings team rates YELP INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate YELP INC (YELP) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- YELP's very impressive revenue growth greatly exceeded the industry average of 18.6%. Since the same quarter one year prior, revenues leaped by 55.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- 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 11.82, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for YELP INC is currently very high, coming in at 88.55%. Regardless of YELP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, YELP's net profit margin of 29.78% compares favorably to the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Internet Software & Services industry and the overall market, YELP INC's return on equity is below that of both the industry average and the S&P 500.
- YELP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 49.57%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- You can view the full analysis from the report here: YELP Ratings Report