What the heck is going on with Yelp (YELP)? It's become the company that doesn't go down on good or bad days.
I have a theory: you simply have to go back to the day it reported at the end of July to recognize what happened here. First, the stock ran into the quarter, which was a huge upside surprise with 61% growth year over year and a 4-cent-per-share profit. I don't know a soul who was looking for a profit.
But the stock had run into the quarter, so initially the stock just went up about a buck. And then it came out that there was a slowdown in what's known at the active local business account growth. No matter that active local ad growth ACCELERATED, meaning that sales people were beginning to go after more elephant accounts instead of settling for lots of little ones, this metric became the reason why this stock got hammered and gave up all of its gains leading up to the quarter and then some.
For a week after that all I heard was that Yelp was done, finished, stick a fork in it. The talk astonished me because Yelp is one of a handful of apps that's MUCH better on your cellphone than your desktop and Yelp can actually invert the pricing structure and charge more than it does.
Somehow, ever since then, particularly with all of the deal chatter around and the successful completion of the OpenTable (OPEN) deal by Priceline (PCLN), this stock's been roaring. When you look at the short position in the company's shares -- almost 15% -- you have to be wondering what these shorts are thinking. Yelp is one of the fastest-growing Internet companies with a reliable and growing ad business that works fabulously on handheld devices worldwide, a real yellow pages that doesn't require Yelp to write any content. It's about the most perfect business model I can find save Facebook (FB).
I think this is a hung short. The people who are short it are now fighting a junior Tesla (TSLA), a Zillow (Z) without any real competition. The shorts are also probably feeling the pain of the second day of a huge run in Splunk (SPLK) off that better-than-expected quarter.
I have championed this stock forever. As it goes higher I believe the pressure will be on to bring the short in as I bet the next quarter will show similar strength locally, which we now know is what really matters.
Random musings: I know everyone wants to speculate with FireEye (FEYE). I continue to think that Palo Alto Networks (PANW) is the best cyber security play. Be careful El Pollo Loco (LOCO), you usually get a big first quarter out of these private equity firms and then a fizzle. Sell half now, half tomorrow? I reiterate that Burger King (BKW) is a sale here.