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Yelp hits record, called ‘a dominant player’


By Rex Crum, MarketWatch

SAN FRANCISCO (MarketWatch) — Yelp Inc. shares rose to a record Friday as two analysts started their coverage of the online review and recommendation company with upbeat ratings and said it has one of the strongest positions in the mobile and local Internet sector.

Yelp

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 climbed to as high as $64.39 a share, before pulling back to close with a gain of almost 6% at $62.40 after Deutsche Bank analyst Lloyd Walmsley initiated his coverage of the company with a buy rating and an $81-a-share price target, and Barclays analyst Christopher Merwin also began covering Yelp with an outperform, or buy rating, and a price target of $64 a share.


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Yelp shares jump after two analysts initiate coverage with buy ratings.

In a research note, Deutche Bank’s Walmsley called “a dominant player in local Internet” and said the company is in a position to generate more than $1 billion in annual sales in the next five years. The main reason for Walmsley’s views stem from growth in its mobile user base and the ability to “close the loop” with local advertisers.

“The company has a rapidly growing mobile user base, sees higher engagement from mobile users and has potential to monetize better in mobile eventually,” Walmsley said.

Walmsley said that Yelp still is highly dependent on searches generated from Google

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, which accounts for about 50% of Yelp’s traffic.

However, growth in visitors to Yelp from the company’s own mobile app is on the rise, and Walmsley said that should result in less dependency on Google for traffic.

Walmsley pointed to Yelp’s second quarter, in which the company had 108 million monthly unique visitors, with 30% of those coming from Yelp’s mobile app. Mobile visitors in the second quarter reached 32.4 million, a 55% increase from a year ago.

Merwin, of Barclays, said in starting his coverage of Yelp that it is one of the “very few companies” that is well-positioned to capitalize on the opportunities in the mobile and local Internet markets.

Merwin also pointed to gains by Yelp with its mobile app, which has been downloaded to more than 10 million devices and is now the source of almost half of Yelp’s total searches. Merwin said the use of Yelp’s mobile app assists the company in bundling packages to local ad buyers, which then provide faster revenue results “since a user who conducts a search on mobile is in many cases closer to ‘closing the loop’ on a transaction than a desktop user, an ad served on mobile is arguably more valuable.”

Walmsley and Merwin’s positive views on Yelp also came a day after Morgan Stanley analyst Scott Devitt raised his price target on Yelp’s stock to $49 a share from $26.

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Mystic Maggie

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