Yelp shares plunge 26% after Tuesday's earnings loss

Andrew Harrer | Bloomberg | Getty Images. RBC Capital Markets' Mark Mahaney explains why Yelp and Pandora could be ripe for takeover, and why a Netflix deal probably won't happen.

Shares of Yelp (YELP), the online business review site, dropped about 17 percent Tuesday after it reported a surprise second-quarter loss.

Shares were down about 28 percent the following day around 10 a.m. ET.

The company also said its chairman, Max Levchin, would step down from the board to pursue other interests. The shares extended losses after that announcement.

Levchin, co-founder of PayPal (PYPL), provided seed funding for Yelp before it filed for an initial public offering in 2011, according The Wall Street Journal.

Yelp reported a net loss attributable to common stockholders of 2 cents a share, compared with expectations for profit of a penny a share.

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The company posted revenue of $134 million, slightly above projections for $133 million and up 50.8 percent from a year earlier as more businesses advertised on its platform.

However, third-quarter sales guidance came in light of Wall Street's expectations. Yelp sees net revenue for the period of between $139 million and $142 million, well below current projections of $153 million in sales. The company's full-year revenue guidance was also below estimates.

"Consumers are increasingly turning to apps when using their mobile phones, and we are excited about the growth we've seen in app usage, which accelerated to 51 percent year over year," Yelp CEO Jeremy Stoppelman said in a statement.

"We believe our rich content married with our highly differentiated local advertising product will position us well to capture a meaningful share of the large local market."

Yelp said local advertising revenue rose 43 percent, year over year, to $107.9 million.



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