Yelp's the thing. Close observers of these columns know that I follow Yelp (YELP), which went to an all-time high today, very closely because it is all about the social, the mobile and the cloud, which, as I say in my new book Get Rich Carefully, is going to be a booming theme for some time.
I like to measure Yelp's progress because it is the first product that is actually better on a cellphone than a desktop. Almost all of Internet companies have made this difficult transition from desktop to mobile and it's been painful for the vast majority of them. You heard yesterday how Yahoo! (YHOO) CEO Marissa Mayer said the future is mobile. Well, for Yelp, the future is now.
Yelp has this remarkable business model of user-generated content married with salespeople who try to get customers to advertise their wares so that you can find them easily, or order from them after you read a review. Of course, it is a virtual circle if you are getting good reviews, but it's a vicious cycle if you are not confident in the reviews because you can advertise your wares all you want, it may not matter.
But think back to what, at one time, was one of the most lucrative businesses around: the Yellow Pages. You just had to be in the Yellow Pages if you were going to grow your business. The Yellow Pages were run by different telephone companies and it was a license to print money.
Yelp is the on-line, mobile Yellow Pages and it, too, is a license to print money. Unlike the phone companies, where growth was always hampered by regulation, there is no regulation for Yelp and it can expand worldwide with the same business model and the same fast-move advantage.
That's why when JPMorgan Chase (JPM) revealed proprietary studies that showed Yelp doing much better than people thought, the shares jumped furiously.
This stock, which I have been a big supporter of forever, was slammed when it reported its last quarter and then issued an equity deal. Since then, it chewed through a remarkable amount of supply and has come out on the other side.
So, how do you value Yelp? I think you value it like an opportunity, and I think the opportunity to be the world's Yellow Pages is worth more than the $5 billion it is valued at now. How much more? I have a hard time thinking it isn't worth substantially more, the opportunity is that great.
This stock is not for the squeamish, however. A stock that can go up $5 can go down $5. That said, the direction this stock can go now that it has gotten through the overhang is clear to me: higher. The company has what customers want and what the market wants: social, mobile and the cloud -- and there just aren't a lot of those companies out there. Yelp is a buy, plain and simple.