Wedbush Analyst Michael Pachter Comments on Yelp IPO

Wedbush analyst Michael Pachter appeared on CNBC earlier to discuss the upcoming Yelp IPO. The website is set to price its initial offering at $12-14 a share. Pachter said that Yelp had a lot of potential growth, as only 16,000 business currently pay for coverage. In total, Yelp has a potential market of over 20 million businesses. Pachter stated that Yelp had a huge upside if more business start paying. On advertising, Pachter said that Yelp is currently spending more and more on sales and marketing ever quarter. In fact, it amounted to 65% of revenue. Pachter liked this, as he said the company was building a "big moat" and it will take competitors a lot to catch up. Pachter said the company's 66 million users composed a valuable list. When asked, Pachter said that investors could compare Yelp to recent IPO Angie's List, but that Yelp was still in its infancy. Yelp needs to raise money, which is not usually a formula for success, but the company could become profitable in a year. Pachter stated that underwriters offer few shares to keep price high. Investors will not find out the true value of the company until the lock-up period expires. Overall, Pachter said that more IPOs could be seen soon. With the expiration of the Bush tax cuts, more IPOs may come to market before the end of June, with lock-up periods before the end of the year.