The stock price of Yelp Inc (NYSE:YELP) increased 11.23% to $31.21 per share on Friday as investors perceived an opportunity to buy the company’s shares at discount prices.
Yelp lost more than 42% of stock value year-to-date. The company’s stock declined from its highest trading price at $59.37 per share to its current trading price. In fact, its stock price dropped to as low as $20.50 per share over the past 52 weeks.
The shares of the company collapsed on July 29 after announcing its decision to stop selling national advertising brand, and reduced its revenue guidance. Yelp recorded the biggest gain today since May 27 and the highest stock price in July 28.
Yelp remains a leader in connecting local business to consumers
Yelp CEO Jerry Stoppelman has been convincing investors that the company is on the right direction by improving its local advertising sales team, and pulling back banner ads from national brands that do not get responses from its users. The move was part of its shift to mobile users, which account a larger portion of its audience than desktop users.
Mark Mahaney, an analyst at RBC Capital Markets recently stated that Yelp is still a leading platform that connects local businesses with internet-driven consumers. He also noted that the company’s app ranking is climbing consistently.
Mahaney said Yelp shares have a “reasonable” potential upside of 20% and could increase as much as 62%. According to him, “The Local capabilities and loyal user base the company has created could be attractive to a wide variety of large cap Nets.” He upgraded his rating on Yelp stock to “Outperform” from “Sector Perform.”
Yelp financial performance
Yelp recently reported better-than-expected adjusted earnings and revenue for the third quarter. It was the first time for the company to record a non-GAAP profit this year, but it still reported losses on GAAP basis.
During the third quarter, Yelp posted non-GAAP earnings of $0.03 per share and $143.6 million in net revenue, an increase of 40%. According to the company, its cumulative reviews increased 35%, local advertising accounts climbed 37%, and app unique devices rose 39% year-over year.
Yelp expected to achieve a 38% growth in revenue in the range of $149.5 million to $154.5 million in the fourth quarter.
Yesterday, the company announced the results of a survey conducted by Harris Poll, indicating that 64% of Americans plan to make purchases at local businesses this holiday season. Local shoppers intend to spend an average $258 at local businesses—a great opportunity for Yelp to boost its advertising revenue.
