Oppenheimer Takes 'Wait and See' Stance on Yelp: Analyst

Wednesday, 11 Apr 2012 | 2:57 PM ET

It's not every day all four banks that helped fund an initial public offering come out with less than superlative ratings on that company, but that's what's happened with daily-deal site Yelp.

Two of the underwriters — Citigroup and Goldman Sachs — rate the company at "neutral" while Oppenheimer has a "perform" rating. Jefferies rates it a "hold." Price targets range from $23 by Jefferies, to $26 by Goldman and $28 by Citigroup.

Underwriters at Odds With Yelp?
Discussing Yelp's business model and the role advertisers play in the company, with Jason Helfstein, Oppenheimer senior analyst.

Oppenheimer has a $23 target because Yelp is the most expensive stock within the Internet sector, having risen 72 percent since its IPO, senior analyst Jason Helfstein told CNBC Wednesday.

"We think it’s a terrific company," he stressed. "But at the end of the day it’s a very expensive stock and the company hasn’t given any type of public guidance yet…For anybody that bought the deal, it’s kind of take a wait and see approach at this point."

Part of the problem is Yelp's business model, with its revenue based on "subscriptions" by advertisers. Right now "only 4 percent of the advertisers listed on the site pay to advertise. So average spending per advertiser is $2,400, or 25 percent below what the average is" compared with other local online advertising such as the Yellow Pages.

"The issue isn’t just penetration because the company is new. They’ve only convinced 4 percent of their available advertisers to actually pay," he added. "We think that’s a pretty low number."

Still, Oppenhemier is forecasting 41 percent revenue growth for Yelp "but we think a lot of that enthusiasm is going to be priced into the shares at these levels."

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Trader disclosure: On Apr 11, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Jon Najarian is long AAPL; Jon Najarian is long GS; Jon Najarian is long INTC; Jon Najarian is long IBM; Jon Najarian is long HFC; Jon Najarian is long WNR; Jon Najarian is long RIMM; Jon Najarian is long SBUX; Jon Najarian is long RIG; Jon Najarian is long FSLR; Jon Najarian is long TSL ; Jon Najarian is long THOR; Jon Najarian is long CME; Jon Najarian is long CBOE; Jon Najarian is long CIGX; Josh Brown is long AAPL; Josh Brown is long JPM; Josh Brown is long WFC; Josh Brown is long GLD; Josh Brown is long XLU; Josh Brown is long COP; Steven Weiss is long JPM; Steven Weiss is long CSC; Steven Weiss is long BRCM; Steven Weiss is long JPM; Steven Weiss is long BAC; Steven Weiss is short AAPL SHORT PUTS

For Abigail Doolittle
Nothing to disclose

For Jason Helfstein
Oppenheimer & Co. Inc. makes a market in the securities of YELP
Oppenheimer & Co. Inc. expects to receive or intends to seek compensation for investment banking services in the next 3 months from YELP and YELP1
In the past 12 months Oppenheimer & Co. Inc. has received compensation for investment banking services from YELP and YELP1
In the past 12 months Oppenheimer & Co. Inc. has managed or co-managed a public offering of securities for YELP and YELP1
In the past 12 months Oppenheimer & Co. Inc. has provided investment banking services for YELP and YELP1

For Daniel Ives
Nothing to disclose

CNBC.com with wires.

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