Yelp Inc (NYSE:YELP) surged 23% in yesterday’s trade on reports from Wall Street Journal that the stock is working with the investment banker, Goldman Sachs to find a suitable buyer.
This $2.9 billion market cap company might be valued at $3.5 billion, based on the reports from wall street journal. Meanwhile, analysts from Piper Jaffray as well as SunTrust estimated that Yelp’s competitors Google and Apple to be in the line for acquiring Yelp. Moreover, SunTrust also suggested Yahoo, while Piper Jaffray named Facebook as potential suitors. Other analysts expect Amazon.com and Priceline also in the line. SunTrust expects that Yelp could be valued at $66 per share which is an upside of over 40% from the current levels.
However in 2009, Yelp was in talks with Google for a possible acquisition for over $500 million, which eventually did not happen. Since then, the term between the two companies were not good, and we need to wait and watch if Google will be really interest in Yelp now.
Piper says that there is a high probability of potential acquisition of Yelp and if big firms like Google, Apple and Facebook acquire Yelp, they can get more technological synergies and grip in local ads market. The company’s strong loyal customer base of 144 million unique visitors and over 79 million mobile unique visitors, offers an attractive opportunity to firms who want to enter the restaurant zone.
Competitors move in Yelp’s market
Last year, the travel booking platform, Priceline.com acquired OpenTable, to enter into restaurant services segment for $2.6 billion in June. TripAdvisor, Yelp’s major competitor with over 315 million monthly unique visitors, has acquired over five restaurant websites in 2014. Meanwhile, Yelp recently added Eat24, an online food delivery service and SeatMe in 2013. Other players like Amazon launched Amazon Services to support customers to find local professionals for services like housecleaning, repairs and lawn care.
Earnings missed Analyst estimates
Earlier, over a week ago, the company’s shares plunged almost 23% on April 30th on the back of disappointing earnings. The company’s guidance disappointed the street estimates of over $138 million, as Yelp issued a revenue guidance in the range of $131 million to $134 million
Moreover, Yelp was expected to report a revenue of over $120 million by the street, but could generate only $118.5 million for the first quarter of 2015. Although the company posted a year on year increase of 29% on its mobile unique visitors, it decreased less as compared to earlier quarters, wherein Yelp posted 37% increase in last quarter and 52% growth in previous year.