Yelp & Apple
News that YELP will be included on Apple's new maps application is good for YELP as user engagement will likely increase. Also, Apple has started using YELP for all reviews and ratings by Siri. The positive relationship between Apple and Yelp is undoubtedly positive for YELP.
Yelp Leads Social Media Stocks Higher
Over the past month, social media stocks have had something of a bounce. One reason for the move higher has been the turnaround in shares of Facebook (FB), FB is now up by more than 20% over the past month. Also, shares of LinkedIn (LNKD) and Pandora (P) are higher. However, the leader over the past month has been YELP. YELP is up nearly 80% over the past month. The major outperformance suggest that the YELP move is more do to company specific fundamentals than sector fundamentals.
As of June 15, short interest in YELP currently stands at 2.35 million shares, or 16% of the float. It is likely that a part of the rally in YELP has been short covering. However, there are likely more shorts looking to cover as YELP continues to rally.
I would not be a buyer of YELP for a few reasons. Firstly, I am not a believer in YELP's long-term business model. Also, the lockup for YELP will end in August which should lead to a major increase in the float. The end of lockup periods for Groupon and Zynga over the past few months proved to be extremely bearish for both stocks. The same is likely true for YELP. While I am not bullish, I would not sell YELP short as the high short interest leads me to believe that the short trade in YELP is crowded.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.