Forty day quiet period is over
As is typical with IPO shares the company remains in somewhat of a quiet period for the first 40 days of trading before ‘coverage’ on the shares is officially launched. Four of Yelp’s underwriters have initiated coverage on the stock and the reviews on YELP are quite frankly underwhelming.
In all fairness to YELP, since the company began trading on March 2nd, 2012, the shares have done quite well trading as high as $31.96. YELP has still shown initial shareholders gains of over 72% as of this writing. The company is by far one of the better performing IPOs over the past twelve months. However, much of the recent price appreciation has been connected to the overall market rally and because of that, it is believed that the underwriters aren’t overly warm and fuzzy on the shares at this level.
Initiating coverage – current price $25.81
- Oppenheimer’s Jason Helfstein initiated coverage with a “perform” rating. Oddly enough the company has a 12 to 18 month price target of $23 which considering YELP shares are currently trading at $25.81 does that mean this becomes a SELL? Oppenheimer states that the stock is trading at 9.2x estimated 2013 sales, the highest valuation among the consumer Internet universe. Oppenheimer points out that Yelp only reaches 2.9% of all Internet users, meaning there is plenty of upside left.
Mr. Helfstein stated: “With a seven-year track record, Yelp is one of the longest running local business review sites on the web. Yelp traffic far exceeds traditional online directories, broad and niche-based review sites, and sites that offer ‘daily deals.”
- Jefferies initiated coverage with a “hold” rating. The company also placed a $23 price target, stating that “the stock is pricing in much of its near-term upside. Yelp has proven to be “disruptive, scalable and should over time prove highly profitable.” Funny – by my calculations the stock is already 12% higher than those near term valuations.
- Goldman Sachs analyst Heath Terry initiated coverage with a “neutral” rating and a $26 price target. Goldman notes that the growth potential is “appropriately” reflected in the stock’s current valuation. However, Mr. Terry also notes that the company is in the early stages of making money off of its services.
- Citigroup’s leading internet analyst Mark Mahaney has a “neutral” rating and a $28 price target, noting that they are not projected to be ebitda profitable until 2013 and that 50 percent of Yelp’s traffic is driven by Google unbranded searches. Mr. Mahaney believes that Yelp is a market leader but feels that a BUY rating on the company at this point in time is not warranted.
At this stage of the investing game, I’d give YELP a 3 star ranking. Stay with us at Daily Deal Media as we continue coverage on YELP as the company cycles through its 2012 quarterly reports.
Source: The Wall Street Journal
