John Burbank 'Likes Internet,' Adds Yelp to Slew of Internet Holdings
Yelp, the consumer review company that aims to become “the de facto local search engine,” saw its stock decline almost 18% over the last year. But since the start of 2013 it has lifted 7%.
Passport Capital considers both macroeconomic trends and company fundamentals in its stock selection process. The purchase of Yelp adds to his sizable third quarter portfolio weighting in online media and Internet stocks. In the third quarter of 2012 he bought Internet companies HomeAway Inc. (AWAY), Zynga (ZNGA), Groupon Inc. (GRPN), Amazon.com (AMZN), Opentable Inc. (OPEN). He also augmented positions in Google Inc. (GOOG), Priceline.com (PCLN) and eBay (EBAY).
Burbank did not embrace Internet stocks wholesale, as he eliminated his position in LinkedIn Corp. (LNKD) and SINA Corp. (SINA) during the quarter.
On a more macro level, Burbank said several days before the Yelp purchase on Bloomberg that he predicts equities will outperform bonds. He also shared what he is finding most attractive, including Internet stocks:
“We like mid- and larger-cap companies that are high quality and generally world-class leaders. We like companies that have premium shareholder orientation and governance. We think however companies that are predicated on global GDP growth, things that have flawed business models, things with poor governance are shorts and things to be avoided. I do not believe everything is going up. I do believe that in this market, premium companies are going to get rewarded because I would say that governance is probably at an all-time high, certainly in my career. I see companies rewarding shareholders and being aligned with shareholders more than I’ve ever seen before. So we want to stay with those. So I like things across the board, actually, we can find these kinds of situations. I like things in health care, I like Internet. I like certain things in consumer, although I’m very cautious on the U.S. consumer right now and U.S. consumer stocks. I like certain things in basic materials like specialty chemicals, very few gold names, and I’m very, very cautious, however, on global growth...”
Yelp in the first nine months of 2012 reported $96.4 million in net revenue, increased 65% from the first nine months of 2011. Yelp derives most of its revenue from local and brand advertising, and the remainder from other services.
It also incurred a net loss of $13.8 million, or $0.27 per share, compared to a net loss of $7.8 million, or $0.52, the previous year. More information about Yelp is available at its 10-year financials page.
The company is focused on mobile and global expansion. In the first nine months of 2012, it launched in 18 international markets, including Helsinki and Singapore in the third quarter, increasing its worldwide markets to a total of 96. It has not, however, generated significant revenue from its international markets as of Sept. 30, 2012.
Yelp also saw its mobile app used on approximately 8 million unique mobile devices on monthly average.
For the full year 2012, it is expecting 64% year-over-year revenue growth and adjusted EBITDA in the range of $3.5 million to $4 million. It does not expect to be profitable in 2012 due to its philosophy of reinvesting into growth and recent acquisition of Qype, a Germany-based consumer review company.
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