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Yelp Hits a New 52-Week High

Shares of Yelp Inc. (YELP Snapshot Report) reached a new 52-week high of $36.14 on Thursday, Jun 27, 2013. The bullish run reflects Yelp’s better-than-expected top-line growth in the first quarter of 2013, expanding local ads business and strong growth opportunity from higher mobile ads spending.  

The closing price of Yelp on Jun 27 was $34.33, representing a strong one-year return of about 50.6% and a year-to-date return of about 74.3%. The SP 500 jumped 21.1% and 10.3%, respectively during the same period. Average volume of shares traded over the last three months stands at approximately 1462.5K.

Currently, Yelp carries a Zacks Rank #3 (Hold) and has a market cap of $2.25 billion.

Modest 1Q Results, Upbeat Guidance

Yelp reported a loss of 8 cents per share in the first quarter of 2013, significantly narrower than the year-ago quarter loss of 31 cents but slightly wider than the Zacks Consensus Estimate of 5 cents loss per share.

Revenues for the quarter surged 68.5% from the year-ago quarter to $46.1 million, which comfortably surpassed management guided range of $44.0 million–$44.5 million as well as the Zacks Consensus Estimate of $45.0 million.

The better-than-expected top-line growth helped Yelp to raise its fiscal 2013 outlook. Yelp raised its revenue guidance range from $212.0 million–$216.0 million to $216.0 million–$218.0 million. Yelp expects revenues in the range of $52.5 million to $53.5 million for the second quarter of 2013.

Key Growth Catalysts

We believe that higher mobile ad spending presents a significant growth opportunity for Yelp going forward. According to research firm Forrester, ad spending on mobile devices will represent 29% of total online ad spending in the U.S. by 2018.

Yelp’s increasing mobile penetration (approximately 45.0% of all Yelp searches were through mobile) will help the company to better monetize the platform going forward. Additionally, Yelp’s partnerships with Apple (AAPL Analyst Report) and Facebook (FB Analyst Report) and continuing international expansion are other long-term positives.

However, increasing investments and higher sales marketing expenses are expected to drag profitability in the near term.

Estimate Revision

The Zacks Consensus Estimate of a loss of 3 cents for the second quarter of 2013 has remained steady over the last 30 days. For fiscal 2013, the Zacks Consensus Estimate moved down a couple of cents to 14 cents loss per share over the past 30 days, reflecting near-term concerns.

Other Stocks to Consider

Another stock, which is worth considering, is Yahoo! (YHOO Analyst Report) with a Zacks Rank #1 (Strong Buy).

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Mystic Maggie

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