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: