Yelp Implodes: Second Consecutive Earnings Miss, Chairman Resignation

Stock in Yelp Inc. (NYSE: YELP) is trading down more than $9, or about 28 percent, on four times its daily average volume as of 12 p.m. Last night, Yelp reported its second quarter 2015 financial results, which missed estimates for the second quarter in a row and announced the departure of Chairman of the Board, Max Levchin. Marketwatch quoted Yelp Chief Executive Officer Jeremy Stoppelman as follows.

“We thank Max for all his contributions to Yelp since its founding in 2004 when he provided the seed capital to start the company. Max saw Yelp grow from just an idea in my head to a company worth billions of dollars with Yelpers around the world. We have mutually agreed this is the right time for him to step down given the demands on his time. I am grateful for his contributions to Yelp’s success and wish him all the best going forward.”

Max Levchin had this to say about his departure.

“I am extremely proud of what Yelp has accomplished over the last 11 years and believe I leave it well-positioned to take advantage of the large local advertising market, I spoke with Jeremy and felt now is the right time to transition off the board. I’m confident that Yelp is prepared to continue its success as I increase my focus on my CEO responsibilities at Affirm, along with other demands on my time.”

While the comments of both Stoppelman and Levchin seem to stress the idea that Levchin is merely looking for a change of pace and to attend to other affairs, today’s action in Yelp shares cannot be ignored.

Yelp has lost over $1 billion in market capitalization today alone. The action brings the year-to-date loss of YELP share value to near 55 percent.

Wall Street analysts’ consensus estimates had been calling for second quarter earnings of $0.01 per share: Yelp reported a loss of $0.02. This story is identical to the one that played out in the first quarter. Analysts had been forecasting profits of $0.01 and Yelp reported a loss of $0.02. This is a 300 percent miss. Equity markets may forgive one-off EPS missteps from young companies, but two 300 percent misses in a row results in the type of trading we are witnessing in Yelp shares today.

Yelp’s gross sales were reported at $133.9 million, just beating analyst expectations of $133.5 million. That Yelp has been consistently unable to meet EPS targets, even when meeting sales targets, suggests execution and cost control problems within the firm.

Business Insider has reported that mobile Yelp users had topped 83 million per month, exceeding desktop users for the first time in Yelp’s history. This fact, however, seems to be lost on market participants — Deutsche Bank has cut their price target on YELP shares from $33 to $26 on the news.

[CEO Photo by Chip Somodevilla / Getty Images – Chairman Photo by Michael Kovac / Getty Images]