Yelp drops in premarket dealings as measure of visitor growth slows in 4Q; 2015 guidance soft

Markets Associated Press

Shares of Yelp are falling before the market open on Friday partly because a key measure of visitor growth slowed in the fourth quarter.

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The San Francisco company, which runs a website where consumers post reviews on businesses, said Thursday that average monthly unique visitors rose 13 percent year over year. However, that's down sharply from a 39 percent increase in the prior-year period.

Shawn Milne of Janney Capital Markets said in a client note that the metric was also down from the third quarter's 19 percent growth. This was partly because Yelp's mobile visitor growth of 37 percent was down from the 46 percent growth in the third quarter, the analyst said.

There was also a slowdown in active local business accounts. Yelp Inc. said that the figure climbed 39 percent in the fourth quarter. A year ago it increased 69 percent.

Milne and Jefferies' Brian Fitzgerald both noted that Yelp's 2015 adjusted earnings forecast was a bit soft due to plans to increase marketing expenses. The company anticipates adjusted earnings before interest, taxes, depreciation and amortization in a range of $100 million to $103 million. Analysts polled by FactSet are looking for $123.1 million.

Milne lowered Yelp's price target to $62 from $70 and maintained a "Neutral" rating. Fitzgerald cut its price target to $85 from $105 and kept a "Buy" rating.

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Yelp Inc.'s stock dropped $7.78, or 13.5 percent, to $49.69 in premarket trading.