Yelp’s stock has fallen out of favor with the investors and the price has declined by over 50% in the past six months. As a result, the stock has also under-performed the broader markets. The company operates in geographies gives it access to over 76 million local businesses. As the company expands into new regions, its margins and monetization rate will be negatively impacted. Nevertheless, it still remains a dominant player in the $130 billion local ads business market, and should continue to rule the roost in the coming years. However, competition from Facebook and Google is intensifying, which is hurting Yelp’s growth potential. In this note, we explore factors impacting Yelp’s valuation.

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