Yelp shares tank on scathing reviews for company’s results
Stock plunges more than 26 percent after a negative sales report, forecast
The reviews are in, and they are giving zero stars to Yelp.
The San Francisco-based online review and recommendation company watched its shares plummet more than 26 percent Friday, to close at $31.93, following what could only be called a disappointing quarterly earnings report and outlook. Late Thursday, Yelp said that it added no net new advertising customers during its third quarter, as the company saw the effects of a change in the kinds of contracts it offers.
UBS analyst Eric Sheridan said in a research report that Yelp’s results show “key debates on (its) business transition and (management) execution” are likely to come to the forefront of investors’ concerns about where Yelp stands in the market for local-based online advertising, in particular. “Unlike last quarter, which hit all the upside high points in the transition, we think investors now will place Yelp squarely back into the ‘show me’ camp,” Sheridan said. Sheridan, who has a sell rating on Yelp’s stock, slashed his price target on the company’s shares to $28 from $39.
Earlier this year, Yelp switched to offering local advertisers contracts without any set term lengths from its prior method of signing up customers to long-term ad deals. The switch resulted in a high rate of cancelled contracts
Yelp said that during its third quarter it earned 17cents a share, which topped analysts’ forecasts for a profit of 10 cents a share, but its sales failed to meet expectations.