OPEN Market Research & Analysis Report
Updated Jan 4, 2014

Growth and Balance Sheet

The company  reported a net income of $7.6  million, or 33  cents  basic  earnings per share  (32 cents diluted earnings per share),  for the  third  quarter of  2013  ending September30. That's up from a net income of $5.9 million, or 26 cents diluted earnings per share for the same quarter last year. Revenues for the third quarter were $46.7 million, up from $39.7 million for the same quarter last year. The restaurant base increased 17% to 30,964 in comparison to the same quarter last year. Moreover, seated diners was up 30% to 38.5 million year on year. Reservation revenue was up by 27% to $27.8 million in comparison to the same quarter last year , primarily due to the increase in seated diners; Subscription revenue  was up by 11% to $15.8 million in comparison to the third quarter last year, primarily due to the increase in installed restaurants using the Electronic Reservation Book solution; and Other revenue was down by 15% to $3.0 million year on year,  the change in the pricing of  the  promotional products from a flat rate to  a pay-for-performance model. Operating income margin was  21.88% which is down from 23.06% recorded in the third quarter of 2012, primarily due to increase in marketing expenses, headcount-related expense, and professional services expenses. Cash flow from operating activities for the first nine months of 2013 was $42.8 million, down from $45.3 million for the same period last year. The company expects fourth quarter EPS to be in the range of 33 cents to 37 cents, compared to EPS of 32 cents for the same quarter last year. OPEN full year 2013 EPS are expected to be of $1.29 to $1.33, compared to $1.03 for the full year 2012. The financial strength indicators of the company are at satisfactory levels The current ratio of 2.82  is  better than  the industry average of 2.64.  Also, the company does not have any outstanding debt as of September 30. In terms of efficiency, the asset turnover ratio of 0.72 is slightly below the industry average of 0.97; however, the receivables turnover ratio of 8.61 is at better levels than the industry average of 6.23; and the ROE of 16.93% is better than the industry average of 13.5%.

Valuation

OPEN PE stands at 61.44 above the industry average of 38.6, and above the stock market average represented by the S&P 500 average of 18.89. The company is currently trading above the maximum P/E ratio of 15x, and over the last five years, the company’s shares have traded in the range of 39.06x to 631.40x trailing 12-month earnings. OPEN's current Price/Sales of 10.05 is above the average of its industry of 4.13. OPEN’s head to head comparison to its main competitor shows that the company has lower gross margin, but one that is still higher than the industry average. The operating margin is better than YELP’s, but it is  still below  the industry average.  The quarterly revenue growth of the company is below what YELP achieved, but above the industry average. OPEN trades at much lower P/S ratio than what YELP is trading at. OPEN’s twelve trailing months EBITDA is $57  million, which is much better than the negative EBITDA of YELP. The stock is currently trading below its intrinsic value of $90.70,  this suggests that the stock is  currently undervalued at these levels. The beta of 1.2  implies  higher  volatility of the stock with respect to the S&P 500. OPEN  has  shown  very  favorable earnings consistency over the last five  years.  Moreover, the company  earnings have grown  by  47.10% over the last four  years.  Moreover, the current quarter earnings in comparison to the same quarter last year have grown by 23.08%. The company currently does not have any outstanding debt. OPEN’s current price levels are slightly above the maximum level, 10.76% below the 52 week high of $87.48, and the technical analysis give a neutral view of the stock. The majority of the analyst ratings are hold. OPEN does not pay any dividends at the moment.

About OPEN

OpenTable, Inc. (OpenTable) provides solution that forms an online network connecting reservation-taking restaurants and people who dine at those restaurants. Its solutions include its electronic reservation book (ERB) and OpenTable Connect (Connect). Its solutions for diners include www.opentable.com, its restaurant reservation Website, as well as a range of mobile applications. The OpenTable network includes approximately 20,000 OpenTable restaurant customers spanning all 50 states, as well as select markets outside of the United States. During the year ended December 31, 2010, it seated approximately 6.5 million diners per  month. In June 2013, OpenTable Inc acquired JustChalo Inc. In August 2013, the Company announced that it has acquired Rezbook, Urbanspoon's reservation management system for restaurants. In December 2013, OpenTable acquired Quickcue, LLC, a provider of guest management systems for restaurants.

Competitor Comparison

OpenTable, Inc. (NasdaqGS:OPEN) N.V.

Highlights

OpenTable, Inc. provides restaurant reservation solutions primarily in the United States, Canada, Germany, Japan, Mexico, and the United Kingdom.  The stock closed yesterday’s trading session at $78.07. In the past year, the stock has hit a 52-week low of $48.81 and 52-week high of $87.48. The intrinsic value of the stock is above the current price. OPEN has a market cap of $1.84 billion and is part of the Technology sector.

• Leading provider of restaurant table management solutions 
• First mover with the Electronic Reservation Book
• Good business model that earns revenues in virtually all areas 

• Seasonality of the restaurant industry 

OPEN Intrinsic Value

Stock Valuation Model & Intrinsic Value Definitions

Investors should keep an eye open for stocks that are trading within 10% of their 52-week highs, as it is likely to continue in its upward trend.  OPEN's 52 week high is $87.48, current price is $78.07, is 10.76% below the 52 week high.

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. The company has a P/E ratio of 61.44 the  average industry P/E ratio is 38.6 and is above the S&P 500 P/E ratio of 18.98.

When there is strong insider ownership which we define as 8% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders. Insiders own 6.58% of OPEN stock. Management's representation is  not  large enough. This does  not  satisfy our minimum requirement; companies that pass this test are more attractive to our valuation model.

The model is using several technical indicators (MACD, RSI, MFI, OBV, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value.

OPEN is trading in the range of $78.23 - $82.97 in the past 30 days. The stock has been showing support around the level of $75 and resistance in the $85 range. The stock is trading right at the 50-Day Moving Average and above the 200-Day Moving Average. The RSI(14) is 49.66. As can be seen from the graph on page 1 the stock is in a bullish trend since the beginning of the year.  It  hit  $87.48 which is highest level since April 2011.  In early  November the stock gapped up  and is trading in a horizontal channel for the  past two months, finding  support  at $75 and  facing resistance around $85 (orange lines).  Currently the stock is in the middle of that channel and it seems that investors are taking time to decide on the future course ofthe stock. Our indicators give a neutral view of OPEN.

The financial health of the company the higher the better, we evaluate all the financial ratios of the company.

Investor’s sentiment for the stock.

The model assigns a value according to analyst’s recommendation for the stock. Analyst rating on Reuters.com is 1 Outperform, 13 Hold, 1 Underperform, and 1 Sell.

We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year. OPEN’s annual EPS for the last 4  years were 0.22, 0.58, 0.88, and 1.03  this type of earnings action is very favorable.

The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry.  OPEN’s  currently does not have any outstanding debt.

The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 15% that this model likes to see for a "good" growth company. Stocks with improving earnings are worthy of your extra attention. OPEN’s  EPS growth for this quarter relative to the same quarter a year earlier is 23.08%, aboveour target.

This stock valuation model looks for annual earnings growth above 12%, but prefers higher than 20%. OPEN’s annual earnings growth rate over the past fouryears is 47.10%, above our target.

¹Tradespoon Score and Outlook: This score conveys Tradespoon’s long-term outlook of 1 to 5 years for a particular stock. Tradespoon uses proprietary methods to rate its trading picks on a scale from 1 to 10, with a 10 being the most favorable expected risk and return outlook. To determine a stock’s rating, Tradespoon uses an advanced algorithm that factors in fundamental and technical analysis to determine a stock's expected risk and return.