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Shares of Yelp Inc. (YELP - Snapshot Report) reached a new 52-week high of $36.14 on Thursday, Jun 27, 2013. The bullish run reflects Yelp’s better-than-expected top-line growth in the first quarter of 2013, expanding local ads business and strong growth opportunity from higher mobile ads spending.  

The closing price of Yelp on Jun 27 was $34.33, representing a strong one-year return of about 50.6% and a year-to-date return of about 74.3%. The S&P 500 jumped 21.1% and 10.3%, respectively during the same period. Average volume of shares traded over the last three months stands at approximately 1462.5K.

Currently, Yelp carries a Zacks Rank #3 (Hold) and has a market cap of $2.25 billion.

Modest 1Q Results, Upbeat Guidance

Yelp reported a loss of 8 cents per share in the first quarter of 2013, significantly narrower than the year-ago quarter loss of 31 cents but slightly wider than the Zacks Consensus Estimate of 5 cents loss per share.

Revenues for the quarter surged 68.5% from the year-ago quarter to $46.1 million, which comfortably surpassed management guided range of $44.0 million–$44.5 million as well as the Zacks Consensus Estimate of $45.0 million.

The better-than-expected top-line growth helped Yelp to raise its fiscal 2013 outlook. Yelp raised its revenue guidance range from $212.0 million–$216.0 million to $216.0 million–$218.0 million. Yelp expects revenues in the range of $52.5 million to $53.5 million for the second quarter of 2013.

Key Growth Catalysts

We believe that higher mobile ad spending presents a significant growth opportunity for Yelp going forward. According to research firm Forrester, ad spending on mobile devices will represent 29% of total online ad spending in the U.S. by 2018.

Yelp’s increasing mobile penetration (approximately 45.0% of all Yelp searches were through mobile) will help the company to better monetize the platform going forward. Additionally, Yelp’s partnerships with Apple (AAPL - Analyst Report) and Facebook (FB - Analyst Report) and continuing international expansion are other long-term positives.

However, increasing investments and higher sales & marketing expenses are expected to drag profitability in the near term.

Estimate Revision

The Zacks Consensus Estimate of a loss of 3 cents for the second quarter of 2013 has remained steady over the last 30 days. For fiscal 2013, the Zacks Consensus Estimate moved down a couple of cents to 14 cents loss per share over the past 30 days, reflecting near-term concerns.

Other Stocks to Consider

Another stock, which is worth considering, is Yahoo! (YHOO - Analyst Report) with a Zacks Rank #1 (Strong Buy).

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