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J.P. Morgan downgraded shares of Yelp YELP –3.97% , the provider of local-market restaurant and business recommendations, to Underweight from Neutral, citing concerns regarding the scaling of the company’s advertising business model.

Ziff Davis ZD –1.79% , a digital media and internet company, also was downgraded, to Neutral from Overweight.

Online advertising, which has been struggling, is a point of concern for internet companies. J.P. Morgan wrote that online advertising “trends have worsened” in the fourth quarter and “are unlikely to improve at least through 1H23.”

The analysts trimmed their price target on Yelp (ticker: YELP) to $23 from $34 and wrote that while the company beat expectations this year due to success in its ad business, it “started to observe increased caution from some of its national/mid-market advertisers” in restaurant and retail spaces.

Yelp largely makes money through local advertising, an expanding market, but analysts are wary of how effectively that business model can scale due to the “inherently high” churn rate for small and mid-sized businesses. Analysts also voiced concerns for consumer traffic declining as users pivot to competitors like Alphabet GOOGL +0.66%  ‘s (GOOGL) Google, Meta Platforms META +2.28%  ‘ (META) Instagram or TikTok.

In November, the company reported third-quarter revenue of $309 million, in line with analysts’ expectations.

Yelp shares fell 3.6% Tuesday. Shares have tumbled about 29% this year.

Ziff Davis (ZD) makes money through subscriptions and advertising through brands such as Everyday Health and RetailMeNot. J.P. Morgan analysts called the company “a serial acquirer with a proven M&A strategy.” They noted though that “a challenging online ad environment” may impact organic growth, but that it will be tempered by “reasonable valuation” and “an attractive acquisition environment.”

The analysts lowered their price target on the stock to $85 from $115.

So far this year, shares of Ziff Davis have declined about 30%.

Write to Emily Dattilo at