Trip Chowdhry: Yelp Stock Is 'Total Junk'

• In an email recently sent out to investors, Trip Chowdhry, Managing Director of Global Equities Research, shared the firm’s view on Yelp Inc YELP.
• According to the report, investors should “Avoid the stock, it's another total junk.”

In a recent email to investors, Trip Chowdhry shared his firm’s view on Yelp following its 4Q, 2015 Social Media Industry Tracker. The expert recommends avoiding the stock, which he describes as “total junk,” in the same league as GoPro Inc GPRO, Fitbit Inc FIT, Groupon Inc GRPN, Twitter Inc TWTR, Etsy Inc ETSY, Square Inc SQ, Pure Storage Inc PSTG and Box Inc BOX, among others.

What Is Wrong With The Industry?

As Global Equities Research explained in a report issued on December 12, what’s wrong with the industry is the “durability and short life span of these companies.”

In fact, the expert noted, “monetization is moving away from Yelp,” as brand and direct response advertisers are avoiding the company. Moreover, generally speaking, “the market is moving away from review sites,” he added.

“Yelp has zero ‘Interest Graph,’ zero ‘Intent Graph,’ zero ‘Social Graph,’ zero ‘Knowledge Graph,’ zero ‘Influence Graph,’ zero Patents... thus their is hardly any anchor to keep the advertisers spending on Yelp,” Chowdhry continued.

To prove his point, the analyst cited the case of Google’s GOOGL GOOG acquisition of Zagat back in 2011. The tech behemoth paid $125 million for the company and then dissolved it in 2013.

Basically, the problem here –- same as with many other Internet companies -- is that the novelty effect disappears very fast.

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