Underwriters Put a Hold on Yelp
It was revealed on Wednesday that Yelp (NYSE: YELP) has been given a Hold rating by the investment banks that took the company public.
When Yelp went public in March, stock was priced at $15 per share, though the first trade was $22. On Tuesday of this week, it was up to $25.81 per share. That increase has left analysts feeling that the stock has hit its ceiling for the time being, resulting in a whole bunch of Holds. Out of four reports on Wednesday, not one of them opted for a Buy rating.
The stock is up 72% from its IPO, but it is still unusual to see zero of its bankers recommend it. Times are changing, with Wall Street showing rare restraint.
Jefferies said that Yelp's brand and strong network effect make it a clear beneficiary of the secular move of local ad dollars online. The business model is proving disruptive, scalable and should over time prove highly profitable.
Goldman Sachs said that it was initiating coverage of Yelp with a Neutral rating and a $26, 12-month price target. Yelp is the category leader in local business information and user-generated content. While Yelp continues to see strong usage growth across its site and mobile app, the model for monetizing this usage is still in the early stages of development.
"While we believe that Yelp is well positioned to capture the significant shift of local advertising dollars online, we believe this outsized growth potential is appropriately reflected in the stock's current valuation premium relative to the broader internet sector."
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