2Q Results Show that Yelp is Beyond Help

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Yelp (YELP) reported second-quarter numbers last night after the close -- with revenues slightly beating analyst expectations, but the company losing $0.02 per share instead of the 1-cent EPS that market watchers had expected.

Yelp said revenues came in at $133.9 million against the $133.5 million that analysts had expected, with year-on-year revenue growth of 51%. That sounds pretty impressive until one sees that the rate of growth is slowing fairly drastically.

The icing on the cake for Yelp's troubles was the company's forward guidance for the third quarter and 2015 as a whole.

Yelp guided 3Q revenues at $139 million to $142 million, far below analysts estimates of $152.6 million. For the full year, Yelp expects revenues between $544 million and $550 million vs. the Street's $571 million estimate. 

The company further announced reduced hiring goals, as well as plans to shut down its display-ad business by year's end (which led to the reduced forward guidance). In addition, Yelp disclosed that Chairman Max Levchin, a PayPal co-founder, is stepping down. 

Yelp put itself up for sale a few months ago and there were no takers, at which point the company took itself off of the market. I thought at the time that this was a gimmick to goose the share price, and I still think that today.

I've maintained my dark-side trades on Yelp -- sometimes successfully, sometimes not -- ever since the company went public at an absurd valuation and was spurred higher and higher by the Wall Street machine. Today, it's hard to believe that this $2.5-billion company was valued at over $10 billion just 15 months ago.

Now I use Yelp's site all of the time to check out reviews, and I know small-business people who've used it for deals, a la Groupon (GRPN). But I also know that those people turned back to Groupon after trying out Yelp a time or two.

As far as I'm concerned, there's nothing unique about Yelp that will help stem its long-term decline. I'd recommend bailing out if you're long on the stock, as Yelp faces lots of competition from start-ups and companies like Groupon and GrubHub (GRUB).

The way things are at the moment, it seems like Yelp is on the slow-but-sure path to eventual demise, along the lines of what I expect for Angie's List (ANGI). That's unless a buyout happens -- which I don't think will given Yelp's current valuation.

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