OpenTable (NASDAQ:OPEN) will release its Q4 results on Tuesday, February 7, and given the sluggish economy, we could see this negatively impact results. Results could show the impact of diners holding back on going out, which in turn will impact OpenTable. Since it went public, OpenTable beat investor expectation by huge margins repeatedly before slumping in the early part of last year. In the last six months it has recovered about 30%. OpenTable competes in the online restaurant reservation business with Urbanspoon as well as the UK-based companies liveRES Ltd and Livebookings Ltd.
Despite the expected lull in earnings for Q4 2011 we stick to our $65 price estimate for OpenTable at a premium of around 30% to current market prices as we believe there is still a lot of growth and we like the company’s business model.
Number of Diners Seated Might Not Show Much Growth
OpenTable’s had seated 23.6 million diners in Q3 2011, which was fewer than the 23.8 million diners seated in Q2 2011. This was also the first time in the history of the company after it went public that it reported a decrease in the number of seated diners. And while the slowdown in global economy is primarily to blame, the seasonal nature of the restaurant business also has a hand in reducing these figures quarter-on-quarter for the July to September period.
The fourth quarter, on the other hand, is expected to benefit from the holiday season. But the shadow cast by an uneasy economy, at least for the first two months of the quarter, could easily undermine this benefit in terms of number of diners at restaurants.