We’re at a point in time where anyone can rate anything they want online. We can thank San Francisco-based Yelp for helping create this environment. It’s even one where if you give a negative review of someone’s business on Yelp, you might find yourself getting sued for your opinion.
With that in mind, UBS analyst Eric Sheridan might want to keep his lawyer’s phone number handy. Because he took Yelp itself down a few notches on Wednesday by cutting his rating on the company’s stock to sell in what one might generously call a “negative review” of Yelp’s business prospects.
At the heart of Sheridan’s takedown, in which he also downgraded Groupon to sell, the analyst said Yelp is going to lose out to Alphabet and Facebook in the potential $60 billion market for local Internet advertising. Sheridan said the key issues affecting Yelp are:
- A slowdown in its traffic growth rates.
- Increases in costs for sales-force hiring and marketing that are needed to improve growth.
- More competition in areas such as Yelp’s Eat24 food-ordering business.
- And, a lack of operating earnings that Yelp needs in order to reinvest in areas to counter the strength of Facebook and Google’s online platforms.
Sheridan’s take is just the latest in a string of bad news and/or publicity that has hit Yelp this year. Earlier this week, the company fired back on Twitter to defend itself after it looked Scrooge-like for firing a sales team member who said she needed unpaid time off to care for her brain-injured boyfriend. In February, an Eat24 employee let loose with an online rant about how much she earned, and other matters. She was then fired, and Yelp CEO Jeremy Stoppelman responded on Twitter to say he had nothing to do with her losing her job.
Then there was the surprise of Yelp Chief Financial Officer Rob Krolik quitting his job and the company’s earnings results being released earlier than planned.
So, with Sheridan’s review on top of all of that, investors gave a collective “Yelp” to Yelp and drove the company’s stock down by as much as 8 percent Wednesday.
All of that has occurred in just the last month. And there might not be any relief in sight for Yelp any time soon. Remember that the Ides of March is just six days away…
Photo: Yelp offices in San Francisco. (Bay Area News Group archives)
The post Yelp gets slammed in analyst’s takedown appeared first on SiliconBeat.