Yelp shares plunge on revenue, outlook
Advertising losses, more competition get much of blame
Shares of Yelp sank Wednesday after the reviews service struggled to hang onto accounts in its local advertising business.
For the quarter, Yelp reported revenue of $197.3 million, up 24%, but falling short of the $198.48 million forecast by analysts, according to S&P Global Market Intelligence. Yelp chief financial officer Lanny Baker said Yelp was lowering its sales outlook for the year.
RBC analyst Mark Mahaney downgraded Yelp stock to “sector perform.”
“These advertisers didn’t find the return on investment they wanted on the Yelp platform, and so they churned, which leads to revenue deceleration and increased costs/lower margins,” Mahaney said in a research note.
A concern for Yelp is a lineup of big rivals for online reviews and recommendations, including giants such as Google and Facebook, as well as sites such as TripAdvisor.
The silver lining: Fewer losses. The company lost $4.8 million inthe first quarter, an improvement from the $15.5 million lost during the same time a year ago.
Yelp CEO Jeremy Stoppelman credited “accelerating traffic growth” across desktop and mobile platforms, as well as a boost in engagement per unique visitor.
But account retention issues and declining advertising revenue could drag on Yelp in the longer term, a report from Stifel analyst John Egbert said.
Shares fell 18% to $28.33.
The silver lining: Fewer losses. The company lost $4.8 million during the first quarter, an improvement from the $15.5 million lost during the same time a year ago.