The losses over the years have led to a large accumulated deficit of $60 million. It is important that the company turns profitable on a net basis fast. At present the liquidity position is good with zero debt and about $95 million in cash, but this may change if the profits do not come over the next few quarters. Even the Qype acquisition was funded majorly through equity and no debt was taken. In absence of profits, getting more funds may get relatively difficult in future. The revenue growth has been excellent with a manifold rise over the last few years. The online advertising market is expected to grow in importance, and a strong brand like Yelp can take advantage by good marketing strategies, new offerings, expansion into new markets etc. The site ranks 186 in the world and 45 in US for internet traffic. However, competition is also going to increase. Even the existing players like Google (GOOG), Yahoo (YHOO) and Bing provide services which compete with Yelp. Importantly, Yelp depends on these search engines for traffic. This makes it a bit vulnerable. Further, there are smaller players in same or other segments like IZEA (IZEA) which are likely to provide direct / indirect competition. Some analysts consider Angie's List (ANGI) as a better bet than Yelp. All this may lead to lower pace of growth for Yelp, but the growth will continue. At present 79% of its revenues come from local advertising and brand advertising contributes about 15%. Further, US is the main market with almost all its revenues coming from here. International markets provide a lot of scope for growth for the company. In any case, growth has not been a problem so far, and what is required is profitability. Any sign of improvement on that front will provide a strong boost to the stock.
