Yelp Shares Lower As Facebook Could Get Into 'Professional Services'; Here's One Analyst's Take...

• Shares of Yelp Inc YELP were trading down almost 8 percent on Tuesday afternoon.
• The decline seems to have been triggered by news about Facebook Inc FB’s new Professional Services feature, which offers people the ability to find the best-rated businesses in a particular area.
• On Tuesday, Roth Capital Partners analyst Darren Aftahi reiterated a Sell rating and $17.50 price target on shares of Yelp, arguing that Facebook Professional Services further supports the firm’s Sell thesis on Yelp.

In a recent research note, Roth analysts shared their view on Facebook's new Professional Services. The new feature only strengthens the firm’s long-term thesis on Yelp, which stipulates that “business prospects and user growth could be further challenged in local,” the experts expounded.

While the product seems to be available on Desktop only for now, the analysts think the transition to Mobile will not take very long, given the company’s history with other products.

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Below are a few key elements to take into account when considering an investment in Yelp (Sell rated, $17.50 price target, which implies plenty of downside potential):

• Facebook’s new Professional Services feature helps users find nearby businesses, and provides recommendations, ratings and reviews.
• Search results are shown on a map, accompanied by relevant contact information.
• Roth has been tracking Facebook business pages for a while now, and analysts believe “it is only a matter of time before this service rolls out and becomes available on mobile as a direct competitor” to Yelp, Google GOOGL GOOG and others.
• Facebook’s scale (roughly 50 million business pages and “a global monthly active mobile user base of $1.5B+”) makes it an outstanding competitor for anyone in local – “especially given the ~60%+ engagement of mobile daily active users,” Roth noted.
• Yelp trades at roughly 23x EV/’16E EBITDA, while its peers trade at only ~14x. This valuation seems unjustified when the “increasing competitive landscape” is taken into account, the experts assured.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.