The firm told investors that shares of the company are at risk of a pullback if a takeover is not consummated "within the relatively near future."
Analysts at the firm warned that a sales process does not guarantee a transaction.
Baird analysts added that with a deal not consummating in the near term, they see "increasing risks" in owning Yelp shares above the $50 level.
The firm maintained its "neutral" rating with a $46 price target on shares.
About 5.3 million shares of Yelp have exchanged hands as of 12:09 p.m. ET today, compared to its average trading volume of about 5.11 million shares a day.
San Francisco-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.
Insight from TheStreet's Research Team:
Eric Jackson commented on Yelp in a recent post on RealMoney.com. Here is a snippet of what Jackson had to say about the stock:
Since news broke today that Yelp (YELP) has hired bankers to shop itself to other companies, let's look at possible buyers of the social media company:
Yahoo! (YHOO): No chance. Yelp's market cap is now $3.5 billion, meaning a buyer would have to spend considerably more than that to buy it out. Yahoo has about $6 billion in net cash and most of that is promised to shareholders through stock buybacks. Yahoo! can't afford Yelp.
Google (GOOGL): Little chance. There's enormous bad blood between Yelp and Google dating back to when Google tried to scrape all of Yelp's data from its site. Even though Google is nowhere in mobile, the history will be too tough to overcome.
Apple (AAPL): Longshot. This would be a big acquisition for Apple, in terms of size. Apple has shown a preference for taking a "build it myself" approach to Apple Maps (where this would likely fit). Still, there has always been a close relationship between Apple and Yelp. Yelp CEO Jeremy Stoppelman has attended many Apple keynotes over the years.
Want more information like this from Eric Jackson BEFORE your stock moves? Learn more about RealMoney.com now.
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."
You can view the full analysis from the report here: YELP Ratings Report