Ad growths in Yelp (NYSE:Yelp) shows positive growth signs among rivals

Sterne Agee, the investment bank and brokerage house responsible for the coverage of Yelp (NYSE:Yelp) in the official market, has hinted at a positive and consistent growth in sales of Yelp in the coming quarter, stating increase in advertisement revenue and internet traffic as catalysts for growth.

Ever since the California based company was founded in 2004, Yelp’s founder and CEO Jeremy Stoppelman has been working hard and long to transform Yelp (NYSE:Yelp) into an ever growing empire. Yelp (NYSE:Yelp) is a website which facilitates the search of local businesses, and its growing market share is evidence of how much such a service is in demand.

Yelp has faced many challenges over the years, which have potentially hampered its growth. But the online business search engine has broken through barriers and stigmas to emerge victorious among its rivals. Arvind Bhatia, an analyst at Sterne Agee, highlights in one of his research reports that Yelp (NYSE:Yelp) has been accused many times for manipulating reviews on the website, favoring certain businesses over others. Although never proved, these allegations have taken their toll on Yelp (NYSE:Yelp).

The company also faces massive competition by business search engine giants such as Google (NASDAQ:GOOGL), Trip Advisor (NASDAQ:TRIP), and even social media networks like Facebook (NASDAQ:FB). All these businesses share a common denominator: they generate business through advertisement. In recent years, these corporate giants have shifted their energies to local businesses, focusing on providing consumers with information and reviews about local chains.

This shift in business models, along with allegations of fraud, has been tough for Yelp (NYSE:Yelp) to maneuver towards stable ground. According to Bhatia, “Yelp not only competes with Google for advertising revenue, Google is also responsible for generating over half of the traffic on Yelp (NYSE:Yelp). A change in the Google algorithm that reduces the organic reach for Yelp could have a negative impact on Yelp’s revenue or on its marketing costs.”

This change is evident in Yelp (NYSE:Yelp) stock prices. In early March of this year, Yelp (NYSE:YELP) stocks were priced at an all-time high of 101.75. As of Friday, the company has had its stock prices reduced by almost 34%, trading at stock price of 67.

But not all is bleak for the company. Bhatia, along with many other research analysts, are optimistic about the future of Yelp (NYSE:Yelp). In his research report, Bhatia adds that Yelp (NYSE:Yelp) as a company “is only in its first or second innings of growth.” This optimism is also evident in the stock price target set by Sterne Agee, at 85. Even though stock prices fell by 3% by midday of Friday, the company is still determined to return the stocks of Yelp to their former glory.

What may help Yelp (NYSE:Yelp) shares is their lucrativeness. Compared to premium given out by shares of peers of 10 times (combined), Yelp shares gave out a premium of 12 times, in 2014. The company has surpassed expectations of Wall Street experts, giving out a 4-cents per share profit instead of a 3-cent loss. Company’s revenue, as a result, increased by 61%, to approximately $88.8m.