Another competitor of Yelp is Dex One Corporation (NYSE:DEXO). The services of Dex and Yelp directly overlap when it comes to introducing local business to consumers. The only point of difference is that the reviews at Dex are not provided by users. The revenue of Dex is generated from marketing services it provides to local businesses. Since Dex is a significantly smaller setup, its financial position is smaller. However, Dex holds an EPS of 2.05, which is significantly higher when compared to Yelp. Dex is a smaller company in terms of market capital. The market capital of Dex stands at 89.56 million, which is significantly lower than Yelp’s 1.36 billion. Therefore, it can be said that Yelp does not stand strong against its competition with regard to its financial performance.
Yelp also depends upon the search results of Google for the majority of its visitors. Most of the users visit Yelp through Google. Therefore, this overdependence on Google is one of the largest business risks Yelp faces. If Google modifies its search indices and causes the elimination of Yelp’s links, Yelp’s business will be excessively affected.
Yelp’s Market Performance
Yelp’s market performance has been highly volatile in the recent past. Currently, the shares of the company are trading within a range of $21.05 and $22.22. The 52 week range of the share price of Yelp has been between $14.10 and $31.96. From the significant difference between the two extremes, it can be inferred that the market performance of the company has remained highly unpredictable over the past months. The current share price is significantly lower than the 52 week high, and considering the weak financial performance of the company, it cannot be said with a reasonable level of certainty if the company will reach its 52 week high again in the foreseeable future. The following chart represents the trend of share price of Yelp over the past year.
It can be clearly observed from the chart that the share price of Yelp has reached several highs and lows since it was launched on the market. The inclines and declines have been exceptionally steep, therefore rendering the stock a highly risky avenue for investment.
After analysis of multiple relevant factors, in my opinion, investors should hold the investment in Yelp. The rationalization behind this recommendation is that the market performance of the company is highly volatile, and therefore buying the shares in the company may be an unfavorable decision.
The article Local Service Provider Continues to Struggle originally appeared on Fool.com and is written by Muhammad Bazil.
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