RBC Sees Yelp Slowdown, Reiterates Buy

Yelp Inc YELP's growth in local advertising revenue and visitor traffic slowed in the recent quarter, but the company will meet Wall Street's expectations when it posts results Wednesday, an analyst said.

RBC's Mark S. Mahaney reiterated an Outperform rating on Yelp along with an $82 target.

Yelp is off 8 percent during the past three months and closed Monday at $51.02, up $0.41.

Despite Yelp's expected slowdown, the company has strong growth prospects and may attract takeover interest from larger Internet companies, according to Mahaney.

The analyst predicted that Yelp's local advertising revenue growth will hit $100 million, up 53 percent from a year earlier. During the fourth quarter, revenue grew 60 percent for the segment.

Yelp's growth rate for so-called unique visitors will slow to 11 percent for the first quarter, from 13 percent in the fourth period, according to Mahaney.

Yelp hit something of a public relations rough patch in recent weeks, with a documentary film called "Billion Dollar Bully" reportedly in the works that will accuse the company of demanding advertising dollars from small business owners in exchange for positive reviews.

The company has denied the allegation and last week won the dismissal of a shareholder lawsuit that claimed it exaggerated the reliability of its consumer reviews.

Yelp is expected on Wednesday to post earnings of $0.01 a share on revenue of about $120 million, according to the average estimate of 24 analysts following the company.