Yelp Plunges as Loss Exceeds Estimates After Expansion
Yelp Inc., owner of a website that lets consumers review local businesses, slipped after posting a wider quarterly loss than analysts estimated as it boosted spending on expansion into new markets.
The shares fell 4.6 percent to $21.35 at the close in New York. Yelp stock has gained 42 percent since its initial public offering in March 2012.
Chief Executive Officer Jeremy Stoppelman has been pushing Yelp into more geographic areas, especially outside the U.S., seeking to attract more advertising dollars. Though it arrived in 26 new markets in 2012, including Poland and Turkey in the fourth quarter, the company said new locations can take 18 to 36 months to start generating revenue. This year, Yelp will have to prove it can grow abroad profitably, said Tom White, an analyst at Macquarie Capital USA Inc. in New York.
“Early signs in the U.K. appear positive,” White wrote in a note to clients today, saying that Yelp’s purchase of Germany’s Qype GmbH last year should bolster business in Europe. “But it’s still early. Given this uncertainty and likely decelerating growth in its legacy local ad business, we remain on the sidelines.” The analyst rates the stock neutral.
Yelp’s fourth-quarter net loss was $5.32 million, or 8 cents a share, the company said yesterday in a statement. Analysts on average projected a loss of 5 cents, according to data compiled by Bloomberg. Revenue rose 65 percent to $41.2 million, while sales and marketing expenses jumped 59 percent to $25.5 million.
The investment in international markets may continue to drag on this year’s earnings before interest, taxes depreciation and amortization, White said. In October, Yelp acquired Qype, Europe’s biggest local-review website, for about $50 million to push beyond its U.S. base.
Sales in the fourth quarter topped the $40.3 million average analyst prediction compiled by Bloomberg. A year earlier, San Francisco-based Yelp had a net loss of $9.05 million, or 56 cents a share, on revenue of $24.9 million.
First-quarter revenue will be $44 million to $44.5 million, the company said. That compares with the average analyst projection of $44.3 million. In the first quarter of 2012, sales were $27.4 million.
Total reviews on Yelp’s sites, where consumers rate and comment on local businesses from hair salons to insurance agencies and doctors’ offices, increased 45 percent to more than 36 million at year’s end, while average monthly unique visitors grew 31 percent to about 86 million, Yelp said.
Yelp has carved out a niche for itself in local advertising, its largest revenue source, vying for a stake in a local online ad market that may rise to $38.1 billion in 2016 in the U.S., from $21.2 billion in 2011, according to researcher BIA/Kelsey.
Yelp’s local content, “sizable” consumer audience and mobile distribution through Apple Inc.’s Siri voice search put it in a position to benefit from the shift to local ads, White said. Revenue from local advertising increased 87 percent in the fourth quarter to $33.9 million, or 82 percent of total sales.
The company’s mobile applications were used on about 9.2 million unique devices on average per month, and about 46 percent of total traffic came from apps on smartphones and tablets, CEO Stoppelman said on a conference call yesterday.
The review site introduced mobile advertising in the fourth quarter, seeking to take advantage of the increasing number of users accessing the service on handheld devices. The company said about 25 percent of local ads are shown on mobile devices.
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