Yelp (YELP) Sell-Off an 'Over-Reaction', SunTrust's Peck Says
- Market Wrap: SanDisk Slumps on Outlook; Initial Claims Fall; FCC Drops Neustar
- Google (GOOG) Agreed to Pay Incoming CFO Ruth Porat $70M by 2016
- After-Hours Stock Movers 03/26: (OXM) (OREX) (YHOO) Higher; (RH) (GME) Lower (more...)
- GameStop (GME) Misses Q4 EPS by 1c; Issues Light FY15 EPS Outlook
- Restoration Hardware (RH) Tops Q4 EPS by 1c; Guides Q1, FY15
After dropping 6% Wednesday, shares of Yelp (NYSE: YELP) are down another 6% today following an FTC disclosure that the company received 2,046 consumer complaints targeting Yelp over a 5-year period ending March 4, 2014.
SunTrust Robinson Humphrey analyst Robert Peck weighed in on the matter in a note to clients this morning. Peck said while the headline number looks "big and alarming," he is not really sure it is all that significant. He notes 2,046 complaints equates to: 3% of the 67,200 businesses that advertised with Yelp just in 4Q13, 0.1% of the 1.5M businesses that have claimed their free Yelp page to date, and <0.1% of the minimum 2.8 million businesses (as of 2011 per S-1/A filing) that have been reviewed on the Yelp platform.
"We are not sure how these percentages compare to the average business in the FTC or Better Business Bureau database, but the numbers do not strike us as noteworthy given the number of companies that have been reviewed on the Yelp platform," Peck said. "The ‘six subpoenas per month’ also strikes us as unsurprising given the sheer number of businesses that Yelp touches and the potentially contentious nature of reviews."
The analyst also notes this is not a new topic as the firm spent some time on the subject in their initiation (pages 12-13) of Yelp back in February. "There have been questions for some time, in the press and amongst investors, around the legitimacy and policing of content (reviews) on the Yelp platform and around whether the company in any way manipulates ratings and reviews to favor Yelp advertisers and strong-arm non-Yelp advertisers into signing on."
In conclusion, Peck said: "The move in the shares yesterday is likely an over-reaction. To paraphrase our initiation: "These concerns have been around and we do not expect them to dissipate anytime soon. We believe the majority of Yelp content to be legitimate and helpful and the catalyst for bringing more users to the platform and sustaining the all-important network effect. That said, the onus is on Yelp to protect its content lead and content integrity."
The firm maintained a Neutral rating and price target of $100 on the stock.
Shares of Yelp closed at $75.63 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Angie's List (ANGI), Others on Watch as Amazon (AMZN) Set to Roll Out On-Demand Local Service
- SunTrust Downgrades LaSalle Hotel Properties (LHO) to Reduce
- SunTrust Robinson Humphrey Downgrades Quintiles (Q) to Neutral
Create E-mail Alert Related CategoriesAnalyst Comments
Related EntitiesSunTrust Robinson Humphrey, S1
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!