Yelp (YELP) shareholders were already having a tough year; at the ring of the closing bell on Tuesday, YELP stock was off 38% in 2015 as two consecutive disappointing quarters and an abandoned attempt to sell itself failed to inspire much confidence from Wall Street.
Still, it would’ve been nice to sell YELP stock before Tuesday afternoon’s Q2 earnings release. Shares lost nearly 30% of their value after an earnings miss and some miserable guidance for Q3 and the full-year. Shares are now down 55% year-to-date.
But Elon Musk isn’t just lending his time machine out to anybody, so for those still invested in Yelp, the best thing you can do is bite the bullet, cut your losses, sell your shares and move on.
Because YELP stock has been doomed for a while now — and it’s not going to get better.
2Q Results … YIKES
While the San Francisco consumer reviews site managed to grow revenue at a 50.8% clip to $133.9 million — narrowly beating the $133.5 million consensus — earnings per share were nothing to write home about, and guidance was downright horrendous.
Yelp stock lost 2 cents per share, below consensus estimates that called for a penny in profit. On an adjusted, or non-GAAP basis, YELP also disappointed, as EPS of 12 cents came in four cents below expectations.
On top of that, PayPal (PYPL) co-founder Max Levchin stepped down as chairman of the board, and no replacement has been named.
But, as I said, the worst part of the whole endeavor was the deeply disappointing guidance. Analysts had expected revenue of $152.6 million in the third quarter, but instead YELP slashed third-quarter guidance to a range of $139 million to $142 million.
That alone would be bad enough, but the company also cut full-year revenue guidance from the $574 million to $579 million range to the $544 million to $550 million range. There is no respite for YELP stock.
In fact, there’s more bad news. Yelp is ditching display ads, which made up 6% of revenues last quarter, as it tries to improve the customer experience. Oh, and it can’t find anyone that wants to work for it because San Francisco is swarming with tech talent and none of that talent wants to board the sinking ship that is Yelp.
So, good luck trying to find a company that wants to acquire the outstanding shares of YELP stock. It’s a dog, plain and simple. I said as much a few months back in an article titled, “A Yelp Buyout? Sorry, But No One Wants You.”
Needless to say, I wasn’t shocked when no Google (GOOG, GOOGL) offer ever came, and Yelp had Goldman Sachs (GS) suspend the search for a buyer.
If you’re still a Yelp shareholder, bless you. But for your own sake, get out while you still can. YELP stock is still wildly overvalued after its selloff at 50 times forward earnings, and there’s still no bottom in sight.
I repeat the plea I made three months ago, the last time YELP stock disappointed on earnings and took a double-digit tumble: Abandon hope, get out, and never look back.
As of this writing, John Divine was long PYPL. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
