We’re heading into earnings at 27x sales. In the real world, sans the internet hype, if you wanted to sell your business, you’d fetch anywhere from 3 to 5 times sales. Due to the nature of YELP’s potential and overwhelming liquidity in the internet sector, it can sustain a share price of 27x sales, providing they smash earnings estimates.
Are you feeling lucky, punk?
To put things into perspective, NFLX is trading 5x sales. At the very top of the internet sector is LNKD, trading at a very meager 22x sales. FB and Z both trade at 21x sales and everyone else is stuck at around 13-16x sales.
What does this mean, Fly?
If YELP doubles their revenues next year, this means nothing–nothing at all. The 27x sales will begin to look cheap, at around 13.5x next year’s revenues. It all depends on the earnings and outlook.
If you want to gamble, hold the stock through earnings and wish for the best. On the other hand, if you are risk averse and do not care for 20% price swings, sell it and pray to the olde Gods (they are the vengeful ones, unlike the new one’s who like to participate in cocaine parties, drinking and perverted behavior) that the stock will sell off–down to LNKD type valuations, allowing for a reentry into said shares, with all of the love and grace that a Father shows towards his daughter getting married for the second time or graduating from a community college with a GPA of 2.