Yelp!, the San Francisco based business rating website is the latest "hot" internet company to go public and they came on the scene with a bang today. Shares screamed 60% higher soon after the company opened for trading this morning, which puts it in line for the hottest IPO debut since LinkedIn popped 109% on its first day last May (For the record, LinkedIn Shares today are about 7% below where the stock closed on its 1st day). Officially, Yelp! sold 7.1 million shares at $15 which was above the targeted $12-$14 range and valued the money losing venture at just under a billion dollars.
But one day does not a lifetime make (especially as a pubic company on Wall Street), and by most accounts, the road ahead for this 8 year old business that has yet to turn a profit isn't going to get any easier.
"Please don't buy this stock" is Macke's opening salvo in the attached video, in which we hash out the hopes and headwinds surrounding this stock. While their 74% revenue growth last year and a continued push into foreign markets are impressive, the main concern about Yelp! going forward is its reliance on - and competitive threat from - Google.
The top-rank search site crystallized it's fight with Yelp! last fall when it acquired restaurant rating stalwart, Zagat. That could spell trouble for the new kid on the block as Yelp! currently gets about half its traffic from Google.
"You know what that looms like?" asks Macke, a huge boot coming down on a tiny dog that would go 'yelp' and then cease to exist.
Of course, any discussion about new internet and social media stocks would be incomplete without paying respect to Facebook, the true giant of the space that's enroute to its own IPO of historic proportions. By way of comparison, Facebook did $3.7 billion in sales last year off an 800-million person user base, while Yelp! did $83 million in revenue in 2011 and currently has about 66 million unique users per month.
Ultimately, this - and all stock stories - comes down to a matter of valuations and what investors are willing to pay today for expected growth tomorrow.
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