Aegis Capital is hitting the sell-button on Yelp on what it calls "increased uncertainty and volatility for the business model."
The firm downgraded the stock to a sell rating and slashed its price target to $34 from $45 – a call for nearly 20 percent potential downside from Tuesday's close.
"What's troubling for Yelp in the transition to good-'til-cancelled [advertising] contracts is that average revenue per user trended down in 1Q18 as a result, and is likely to continue to trend down for the foreseeable future," analyst Victor Anthony wrote in a note to clients Wednesday.
Yelp shares have fallen 15 percent from their recent high of $48.40 in November of last year – and roughly 60 percent from their all-time high of $101.75 in 2014 – but Douglas C. Lane Managing Partner and Yelp shareholder Sarat Sethi still sees value.
"They're cash-flow positive, they've actually been growing margins…" Sethi said. "I think I would like to own this company for the next couple of years."
Yelp recently restructured a large portion of its advertising clients away from 12-month contracts in favor of non-term contracts in an effort to attract more customers.
"In the short term customers might churn more… but if you look at Facebook or you look at Google, none of them have long-term contracts and Yelp is looking longer-term to say 'this is how we're going to grow our business.'"
Short Hills Capital Partners' Steve Weiss was far more critical of Yelp's future business on Wednesday's "Halftime Report", as he doesn't see the business model transition as a new growth opportunity for the company or a reason to be a buyer of the stock.
"Subscription models have always been worth more and they're going away from a subscription model… and you can't compare [Yelp] to Google and Facebook because those have significant moats around their business and I don't think [Yelp] does."
Yelp shares fell 3.7 percent to close at $41.05 on Wednesday.
Sarat Sethi owns Yelp.