Yelp is really struggling
NEW YORK (CNNMoney) — Yelp is struggling to get a positive review from Wall Street.
And it’s failing. The popular restaurant and shopping review site took a loss of $22 million in the fourth quarter last year, marking the fourth consecutive quarter of losses. In the same quarter of 2014, it posted a profit of $32 million.
Yelp disappointed on another key metric watched by investors: earnings before interest, taxes and other key costs, a yardstick known as EBITDA. Yelp was expected to make over $21 million in these earnings but it only made $17.5 million.
That miss — along with a rough day in markets overall — sent Yelp’s stock off a cliff Monday afternoon, down 13%.
Yelp’s stock hit an all-time high of $101 nearly two years ago. Now the stock trades for a mere $15 a share. Its earnings were unexpectedly posted earlier than expected Monday afternoon due to a third-party publishing error.
The company also announced that its chief financial officer, Rob Krolik, would be leaving, and a search for a new CFO is underway.
Amid slowing sales and trouble retaining talented workers, Yelp faces a credibility issue. Media reports about fake reviews — or even hateful reviews — hurt Yelp’s reputation as a reliable source.
Yelp’s sales growth slowed down last year. Sales grew 40% in the fourth quarter. That may sound good but its sales grew 55% in the same period of 2014.
Despite the stock’s dramatic drop, it’s still expensive. Yelp is trading at 59 times its expected future earnings. The average for S&P 500 companies is about 20.