Archive for March, 2012

YELP Inc. (NYSE: YELP) IPO

Yelp IPOYELP Inc.’s IPO was Friday and I’m not shocked to see it take a opening day jump, but where is heading now?

I wanted to first point out that the IPO was at $15 a share and the shock finished the day up “+9.58 (63.87%)” for the first day, but this is hardly true to the average investor. The stock NEVER was available to the public for anything below $22 during the entire existence of this stock. The stock had a range of $22.00 to $26.00 on it’s first day of trading, but I would argue that the stock is hard to see a bargain value  even $22 a share.

At it’s current price, the company’s market cap. is $1.47 billion. YELP’s last four quarters the company has reported operating incomes of –$8.76m, –$3.39m, –$1.22m, and –$2.80m. The revenues for these quarters were 24.91m, 22.30m, 19.58m, 16.50m, and 15.27m. In other words, revenues are growing, but actual operating income is declining.

The stock market has memories of stocks like Amazon, which traded very low and later became juggernauts, but YELP is no Amazon. YELP is held back by the simple fact that it is limited to advertising revenue, where as an Amazon actually sells items.

YELP is not a new concept or a new startup, it’s a company that has existed since 2004. I fail to see how this 8 year old company has the potential to generate the implied income the market is portraying through it’s market cap of this stock. Even if they were to turn a profit of say $5 million a year, that would put the P/E at 294!

If you are looking at YELP with interest, then I would have to believe Pandora would also incite you as an investor. Pandora (Symbol: P) is also virtually relying on advertising dollars, but had revenues of $75.01 million and produced operating income of $.76m last quarter.

But let’s be frank, both of stocks are gambling. Neither of these two stocks have produced the numbers or even growth to justify where they are market cap wise. I understand that these stocks could be breakouts similar to Amazon, but from a fundamental standpoint, these are weak investments.

Interestingly enough, Pandora has a higher market capitalization, but a lower Alexa Ranking. Alexa ranking is a websites overall global ranking based on traffic. Yelp is currently #192 and Pandora is currently #358. Interesting that Pandora has considerably lower ranking, but has a market capitalization 52% higher.

I personally use both Yelp and Pandora, and I have noticed aggressive ad placement (especially on Pandora), but I worry about these companies long-term strength. I also have noticed my Pandora usage drastically decreasing due to annoying ads. As for Yelp, I stopped using it as much mainly because it’s as not heavily used in the Cincinnati area. When I first moved to Cincinnati, the Quizno’s was the top rated restaurant, no joke. I don’t know whether people were trolling or not, but that Quizno’s ironically went out of business. It has drastically improved since that time.

I think what this all boils down to is people in these companies cashing out. Do these stocks have the potential to generate billions? Sure, but have they produced any real income… No.

Will these stocks go up? Probably, but I ultimately see them lower than they currently are. Whether that takes 5 months or 5 years, I don’t see either of these being a $100 stock, ever. I personally would rather take a straddle of Sprint Nextel Stock, but hey.. that’s me.

Disclaimer: Nothing in this article should be used for any decision making of any kind. Consult a professional for investment planning.

Small House Living and Why You Should Do it

The Tiny House BlogSmall House Living is not a new concept, but with the recent global recession small housing is getting a lot more attention. There are many reasons to live in a small house, but why live in a small house? Here are some reasons to consider living in a small house.

1. It’s Cheap

It goes without saying that most likely, your small house is going to be cheaper. Who doesn’t like having a small payment each month.

2. Can open you up to opportunity

Owning a smaller house produces a lower commitment than a larger home, and with this lower commitment, there is more flexibility when it comes to relocating for potential opportunities. Imagine you are offered a career of a lifetime, but you are forced to relocate. Now imagine how much easier it would be to relocate if you had a $50k home versus a $200k home.  Let’s also not forget that you have to pay an estimated 6 to 7% to get out of most homes, which means it will cost you about 400% more in fees to sell your 200k home. If you aren’t able to sell right away, you also have much lower carrying costs in the smaller home.

3. Helps you Escape “Consumer Treadmill”

A lot of people can most likely relate to the idea of a “consumer treadmill.” By actively living below your means, you will much less likely to allow your lifestyle to creep up to a point where it consumes the majority of your income. Living in a small house will most likely give you better perspective of what is important when it comes to spending your money.

4. It Forces you to Downsize Possessions

If you have a 700 square foot apartment full of crap, there is a good chance you will have a 2500 square foot home full of crap. The idea of furnishing a large space can be daunting and expensive. Also with more storage room, usually comes more stored items that you don’t really need.

5. Less Hassle and More Time

Less time messing with a giant yard and home maintenance and more time for loved ones and activities that you enjoy.

6. Living more “Green”

Small house living also promotes smaller energy bills and less maintenance that results in waste.


For more information on small house living, check out “The Tiny House Blog” (one of my favorite blogs.)

 

imageSpeculation on the iPad 3 release date has caused a price drop of used iPads on amazon. I myself have been considering picking up an iPad 1st generation for reading, and it appears the time is near where iPads will touch $250 on amazon.

iPad 2 – 16gb Wifi is down to only $378 used.

iPad 1 – 16gb Wifi is down to only $259 used.

I have considered trying to get an even cheaper iPad via craigslist, but it is very hard to land an iPad for much less than these prices, and I just don’t think it is worth the time, gas, and effort. Also I can earn 4% back via credit cards and gas perks. Did I mention there was no tax on amazon?

Who knows though, prices might dip even more as it gets close to the suppose iPad Release Date (which apparently is now rumored to be March 16th?)

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