Widely followed hedge fund manager David Einhorn has been yelping about YELP, claiming to see a bright future for the stock whose price has sunk like a stone. Einhorn says the YELP will double its revenue in the next three years.
This market has responded accordingly, with the stock closing Wednesday a dollar higher than what the Greenlight Capital guru bought it at. However, the stock price is near record lows being valued at $22.15.
This all sounds good for you, but it merits further examination. Will following Einhorn’s lead cost you thousands?
YELP has seen most of its high volume trades sell in the last year, and the price has been falling consistently since September 2014. Prices have skydived from $82.99 to a pitiful $20!
Simply put, Einhorn is taking a risk and wants you to gamble on him. The latest jump in buying comes from the hype, and hype almost never lasts—especially in a bear market.
Beyond that, a new documentary about YELP called “Billion Dollar Bully” is coming out soon. The documentary highlights accusations of extortion against business owners who aren’t with the company. It’s serious enough that Einhorn himself has acknowledged its negative effect on the stock, and the film isn’t even out yet!
Instead of getting carried away with this latest fad, take a wait-and-see approach with YELP. If it doubles its revenue over 3 years, you still have plenty of time to jump aboard. Give yourself time to see if you should be bullish, or if you should avoid the Billion Dollar Bully.
I’m waiting until YELP can climb to $24, which is where it will have overcome plenty of trying-to-break-even selling from investors who’ve already been burned by this stock.
