NEW YORK (TheStreet) -- Shares of Yelp Inc (YELP) were trading down 1.9% to $46 in pre-market trading Monday, after analysts at Piper Jaffray downgraded the company to "neutral" from "overweight" this morning.
The firm also lowered its price target to $46 from its prior $70 objective.
Piper analysts said a possible takeout is already priced into shares of the review website operator.
They believe shares are fairly valued given its current outlook.
Analysts wrote in a note this morning, "We believe there is a 65% chance Yelp eventually gets acquired, at a valuation at or slightly below the current share price."
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.
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 5.8%. Since the same quarter one year prior, revenues leaped by 55.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving 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 7.81, 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 92.66%. 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 -1.08% significantly underperformed when compared 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 has underperformed the S&P 500 Index, declining 13.30% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: YELP Ratings Report