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Yelp Purchase Of Reservation Site Gets Nice Reception


Fri, Jul 19 2013 00:00:00 E

Shares of Yelp (YELP) were up 2.5% in morning trading Friday, one day after the company, which features consumer reviews of businesses, announced an agreement to acquire SeatMe, an online restaurant reservation service, for $12.7 million.

Yelp has been on a roll. Its revenue has risen more than 60% year-over-year the past 12 quarters. Investors have responded in kind. The company’s shares have more than doubled this year and in the stock market today hit an all-time high for the third straight day. The stock had an IBD Relative Strength Rating of 95, putting it among the top 5% of all stocks in performance the past 12 months, with an emphasis on the most recent six months.

In a report released Friday, Doug Anmuth, an analyst for JPMorgan, said the acquisition should help to strengthen Yelp’s business, which allows consumers to order food for delivery or pickup and make appointments with businesses such as spas, salons and dentists.


Bloomberg View Enlarged Image

“We believe SeatMe’s online reservation technology enables Yelp to further close the loop between local businesses and consumers and follows the company’s recent launch of the Yelp platform,” he wrote. “We’re positive on the SeatMe acquisition as we think it effectively leverages SeatMe’s software with Yelp’s strong traffic and reviews in the restaurant/nightlife category.”

Yelp already has a partnership with SeatMe rival OpenTable (OPEN). It receives a fee each time a consumer books a reservation on OpenTable through Yelp. Shares of OpenTable were down 6.5% in morning trading Friday on the news.

But Anmuth says the acquisition shouldn’t pose a problem for the company.

“While we expect the acquisition to raise some concerns around the competitive threat to OpenTable, we think the two services are likely to be complementary in the near term, as they serve different types of restaurants,” he said.

RELATED: Yelp, Review Sites Can Be Challenge For Small-Business Owners.

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