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Forget lawsuits—Yelp's going higher, says analyst

Regardless of what happens with a case before the Virginia Supreme Court this month involving possible online review fraud, the stock of social review site Yelp is set to go higher, one analyst told CNBC.

Yelp Inc. signage hangs outside of the New York Stock Exchange (NYSE) in New York.
Jin Lee | Bloomberg | Getty Images
Yelp Inc. signage hangs outside of the New York Stock Exchange (NYSE) in New York.

In the case, the owner of a Virginia carpet cleaning business sued Yelp, demanding that it reveal the identities of anonymous reviewers who disparaged his company.

Owner Joe Hadeed told The Wall Street Journal that the bad reviews—at least seven of which he believes are fraudulent—sank his business by 30 percent. A spokesperson for Yelp told the Journal that the company gets approximately six subpoenas a month, some demanding information about reviewers' identities.

Yelp's stock is down substantially from its all-time high on March 5. But should investors be concerned? Not really, Cowen analyst Kevin Kopelman said in a note Thursday.

No matter the outcome of the case, it's unlikely to fundamentally change Yelp's business, and neither investors nor Yelp users should worry too much, said Kopelman.

"It's not like all users will suddenly have to disclose themselves," Kopelman said.

Relative to the size of its user base, Yelp's number of complaints is fairly small. The site has had 2,046 complaints since 2008, according to the Journal, citing the Federal Trade Commission. That's one complaint per 1,000 active businesses on Yelp, Kopelman said. Complaints have actually declined so far in 2014, he added.

Yelp Inc. (YELP.K: NYSE) YTD

Kopelman put a price target on the stock of $93.00. It closed Wednesday at $75.63. (Click here to get the latest quotes for Yelp.)

A spokesperson for Yelp declined to comment on the lawsuit in particular, but said that while the vast majority of Yelp users are not anonymous, the company protects the rights of the few who are and complies with all applicable laws.

Disclosure: Neither Cowen nor Kopelman has an ownership interest in Yelp, but Cowen lists Yelp as a client and has received compensation from the company.

—By CNBC's Matt Hunter.

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