Yelp Rallies 60%+ on First Day of Trading
On Friday, Yelp's (NYSE: YELP) stock began trading for the first time.
Yelp is an internet-based company that operates on a local business model. Users of Yelp rate local businesses such as restaurants, while at the same time, these businesses can pay for advertising on Yelp itself.
Earlier today, Yelp's co-founder Jeremy Stoppelman appeared on CNBC to discuss his company and the broader outlook for the industry.
CNBC's Jim Cramer asked Stoppelman about his company's ties to Goolge (NASDAQ: GOOG). Google searches account for nearly half of the traffic that goes to Yelp on a regular basis, and therefore Yelp is reliant on the Internet giant to bring new customers to the site.
Google had previously attempted to purchase the company for $500 million dollars—an offer Yelp obviously rejected. Google then opted to acquire rival Zagat. Cramer raised the point that Yelp could prove venerable to Google, as Google could use its power to divert traffic from Yelp to its own brand Zagat.
Stoppelman downplayed this risk, arguing that it was in Google's best interest to drive its users to the best content possible on the web.
Stoppelman was also asked about Yelp's penetration into specific markets—such as hotels—and why, despite being around for years, Yelp remains unprofitable.
According to Stoppelman, Yelp's goal is to create a large brand that consumers are comfortable using on a regular basis. Dominance in specific sectors like hotels should come from the creation of this brand.
On profitability, Stoppelman stated that the company's fourth quarter EBITA showed break-even, and that profitability has not been the company's chief priority as it has focused on growth.
Yelp is yet another Internet IPO to file in recent months. Last year, the market saw offerings from Pandora (NYSE: P), Linkedin (NYSE: LNKD), Angie's List (NASDAQ: ANGI), Zynga (NASDAQ: ZNGA) and Groupon (NASDAQ: GRPN).
Many market commentators have the raised the question as to if we could be seeing another Internet stock bubble similar to that seen in the late 1990s-early 2000's.
Stoppelman argued that this was not the case, and that he was well aware of the situation, as he had worked for Paypal at the time. Still, he understood cautiousness, asking that investors simply keep an eye on his stock.
Yelp is currently trading near $24 after pricing at $15, and opening near $22 per share.
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