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Yelp’s results get rave reviews

Shares of Yelp (YELP) leaped Thursday after investors gave a thumbs up the San Francisco company’s improving financial picture. The online review site posted a net loss in the first quarter of $4.8 million, or 8 cents per share, an improvement over the loss of $9.8 million, or 31 cents, a year earlier. Revenue surged 68% to $46.1 million.
Though the earnings were worse than the 6-cent loss analysts expected, the revenue figure exceeded the $44.6 million consensus forecast.

And Yelp reported lots of other metrics that investors liked. Average monthly visitors to the site surged 43% year-over-year to about 102 million, a record. The number of reviews hit 39 million in the quarter, a 42% increase. Active local business accounts rose 63% to about 45,000. The company estimates that its mobile app was used on approximately 10 million unique mobile devices on a monthly average basis in the quarter.
 
That’s not too shabby for a company that two former PayPal engineers started in 2004 and that went public in 2011. Its shares have skyrocketed more than 60% since the start of this year.   CEO and co-founder Jeremy Stoppelman, not surprisingly, sees better times ahead.

Two women sharing a meal at a diner © Cultura Limited, Superstock“Consumers are also doing more than just reading reviews of local businesses on Yelp,” he said during the recent earnings conference call. “They’re following through and making contact with businesses via check-ins, reservations, clicks to their website, phone calls and directions.”

Yelp got some odd publicity recently amid reports that prisoners were reviewing their jails on the site. But on a more serious note, Yelp faces tough competition from Facebook (FB), which recently began allowing users to mine its site for recommendations from their friends, and from Google’s (GOOG) Zagat service among others. These rivals may buy Yelp one day or grind it into submission. It’s tough to say.

Meanwhile, investor sentiment on Yelp has turned up. Over the past 52 weeks, its share price has ranged from $14.10 to $30.90. The stock isn’t cheap, trading at 237.95 times estimated 2013 earnings. However, it does offer the potential for huge growth. Revenue in the current quarter is expected to surge 62.8%, and analysts expect the company to be profitable next year.

In any case, investors who are in a speculative mindset should consider adding the shares — but be prepared for a bumpy ride. The stock may be volatile for some time.

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Mystic Maggie

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