The amazing uptrend continues. The stock has moved by around 25% in last one month, and is up by more than 50% after the earnings. The positive surprise added to the already existing momentum. Several analysts had increased the price target for the stock after the earnings, but now it is trading much above most of those figures. There are analysts recommending caution, like an article on insidermonkey, but it seems that it is surely in momentum. On the other hand, in an SA article the author states that a large portion of the up move in the stock has come from positive opinions about Yelp’s ability to continue to grow at a fast rate, and increased confidence in its ability to monetize its content. He contends that the stock has lot of upside potential, but it needs to use data science in order to provide relevancy and trust about its content. This can be accomplished by using a weightage system which will reduce the noise and increase the relevancy of the reviews. Interestingly, the net profit is still a few steps away, and the valuations are extremely stretched. The price to sales and price to book are around of 23, which implies that lot of future positive may have been factored in the stock price. Competition from players like Google (GOOG) and Yahoo (YHOO) cannot be underestimated, and there are other players like IZEA (IZEA) (native advertising, social media sponsorship) which may provide direct and indirect competition in the near future. However, momentum has to be respected, and one can tag along with the stock, but with a clear exit strategy in mind. The next earnings will be extra-risky, and any slippages can lead to a correction in the stock. One can play based on the risk appetite.
