Yelp stock falls 4% on downgrade to underweight

Shares of Yelp Inc. closed down 4.4% at $29.04 on Wednesday after the stock was downgraded to underperform from market perform at Wells Fargo. Analyst Peter Stabler also lowered his valuation range on the stock, to between $21 and $23 from $22 to $24 previously. The downgrade reflects expectations that analysts are too optimistic regarding Yelp's potential performance for 2017 and 2018. "The company will face challenges meeting its long-term margin targets," said Stabler in a note to clients Wednesday. Shares of Yelp have risen 41.5% over the last three months, vastly outperforming the S&P 500, which is up 3.4%. However, they've underperformed significantly over the last year, down 18% versus a 2.5% gain for the index. Looking ahead, Stabler said he expects further challenges for Yelp related to international traffic and competition for local ads.

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