Ken Griffin´s Citaldel Investment Group upped by 432% his position in Yelp Inc. (YELP, Financial) to $32.8 million, according to the fund's latest filing. Further, Ken Fisher (Trades, Portfolio) has taken a long position in the stock, initiating a new position with 106,900 shares.
Despite this bullish sentiment, Yelp shares dipped 23% to $25.80 in pre-hours trading after the company beat Q2 revenue estimates but missed on EPS and lowered its revenue guidance for the year, citing slower sales headcount growth and the elimination of its brand-advertising product.
The company reported a surprise loss that fell far below analysts’ expectations. Yelp CEO Jeremy Stoppelman said that "Consumers are increasingly turning to apps when using their mobile phones … and we are excited about the growth we've seen in app usage which accelerated to 51% year over year. We believe our rich content married with our highly differentiated local advertising product will position us well to capture a meaningful share of the large local market."
Revenue grew by 50.8% year over year to $133.9 million, slightly beating the average estimate and adjusted EBITDA increased by 32% to $22.7 million and adjusted net income of $9.4 million or $0.12 per share.
The firm's guidance for Q3 is revenue in the range of $139M-$142M below a $152.7M consensus. For the full year, the company expects revenue in the range of $544M-$550M and below a $571.2M consensus. The numbers are lower than previous forecast provided in April.
"The reduction in guidance in a way validates some of the investor concerns around increasing competition, slowing traffic and reduction in salesforce productivity," Barclays Capital analyst Christopher Merwin said to Reuters.
Analysts at Deutsche Bank (DB, Financial) downgraded to Hold ahead of its results. “With press reports noting Yelp has backed away from considering a sale, asset value provides less of a safety net for deteriorating fundamentals," said Lloyd Walmsley. Further, Barclays issued a similar downgrade the past days.
Yesterday, analysts at Morgan Stanley (MS, Financial) downgraded to Equal-weight from Overweight and lowered the price target to $25 from $53.
Moreover, Max Levchin, a Paypal co-founder, is leaving as chairman of Yelp’s board. He is stepping down as chairman (and from the board) to "pursue other interests."
Final comment
Going forward, I think that is a good time to sell. Yelp missed on EPS, it is going to deploy more money for shifting a transition, and when looking at growth drivers we can see a failure of their original initiatives for growth. Yelp's shares had fallen about 56% this year. The firm has soft guidance for the next quarter which makes me feel bearish.
Disclosure: Omar Venerio holds no position in any stocks mentioned
