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Analysts defend Yelp after Facebook launches competing product

Yelp (YELP), a website which features user reviews on local businesses, is falling for a second day after Facebook (FB) announced that it would launch a new search product. Called Knowledge Graph Search, Facebook's initiative will enable users to view reviews of local businesses written by their friends. As a result, some believe that Knowledge Graph Search will compete Yelp's offerings. However, in a note to investors earlier today, Piper Jaffray analyst Gene Munster wrote that Facebook will have difficulty attracting a large number of users to its reviews, since there are already 37 million reviews on Yelp's website. Moreover, Yelp users can already see reviews written by their Facebook friends on Yelp, Munster noted. Yelp has already successfully withstood challenges from Google (GOOG), and will continue to be a leader in local commerce, the analyst added. Munster maintained a Neutral rating on the stock , due to its volatility over the last six months, which the analyst believes could continue over the next 6-12 months. Similarly, First Analysis analyst Todd Van Fleet wrote that the decline yesterday in Yelp's stock was unwarranted. Facebook isn't likely to replace Yelp as the premiere local search tool, and the market is large enough to support both companies, according to Van Fleet, who maintained an Overweight rating on Yelp. Taking the opposite view earlier today was Northland Securities, which downgraded the stock to Underperform from Market Perform due to increased competition from Facebook. In mid-morning trading, Yelp fell 54c, or 2.62% to $20.07. The stock has fallen about 10% since reaching a high of $22.29 yesterday before Facebook unveiled Knowledge Graph.