Yelp share price crushed as investors give slow growth a bad rating

 

Yelp’s share price has crashed in early morning trading on the New York stock exchange, even after the business ratings service announced its first ever annual profit on Thursday.

 

Stock in the San Francisco-based company is down by almost 20 per cent, at a price lower than $47 per share. Yelp's shares ended at a price of $57 per share at market close on Thursday.

 

Yelp made a net profit of $36.7m (£23.9m) in 2014, its first ever annual profit. Net sales for the quarter rose 56 per cent year-on-year to $109.9m while full-year sales came in at $377.5m.

 

So why the investor exodus? 

 

Shareholders will be concerned with both slowed growth in the company’s users and issues with Google’s algorithm that could be affecting the amount of traffic to Yelp’s app which allows users to rate local businesses.

 

Monthly active users recorded year-on-year growth of 14 per cent to 72m in 2014, a dramatic growth from the 39 per cent growth recorded a year earlier. Furthermore, active local businesses on the service grew 39 per cent, a much more gradual increase compared to 69 per cent the year before.

 

In a conference call Yelp chief executive Jeremy Stoppelman also disclosed that shifts in Google’s algorithm for internet searches have caused “ups and downs” in different regions.

 

Yelp’s share price has steadily fallen by 47 per cent over the last 12 months.