Wunderlich Securities Unfazed By Yelp's Cautious Guidance

Shares of Yelp Inc YELP tumbled on Thursday after the company reported a better than expected third quarter results, but cautious guidance for the fourth quarter.

While many analysts and investors lost some faith in the company, Blake Harper of Wunderlich Securities did not. In a note to clients on Thursday, Harper reiterated a Buy rating and made no changes to his $105 price target.

"We believe Yelp is one of the best positioned companies to take market share of local advertising spend and would look to take advantage of any pullback in the stock," Harper wrote.

Yelp reported 86,000 active advertising customers in the quarter, an improvement from 80,000 in the second quarter. Local advertising revenue rose 66 percent year-over-year to $85.1 million, falling short of the $85.9 million Harper expected. However, the analyst notes that the figure includes national and mid-market chains with multiple locations that advertise under one central account, which could skew the growth of the metric down as these accounts become a larger portion of the total.

Yelp saw a 42 percent improvement in the number of reviews left on its platform to 67 million. The analyst sees this as a "key differentiation and competitive barrier." The company can leverage its size to attract new users and content.

Harper views Yelp's international business as being "undermonetized" given its 30 million unique international visitors. Yelp's business still has a long runway given the fact that the company only sells ads in eight countries while operating in 29 countries.

Bottom line, Yelp is demonstrating impressive growth figures and views the pullback on a poor guidance as a buying opportunity, according to Harper. Yelp is still a company "executing well" on a large market.

Shares were trading at $57.70, down 17.8 percent.