OpenTable Q3 Earnings Next Week: What We’re Chewing On

OpenTable’s (NASDAQ:OPEN) stock price has swung wildly this year, with shares of the online restaurant reservation site rising from around $70 at the beginning of the year to its all-time high of above $115 before slumping to its current sub-$50 level. While the company’s lower than expected earnings for Q1 and Q2 2011 did play an important role in the rapid decline, substantial changes to the its top management – including the exit of highly successful CEO Jeffrey Jordan in May – are also a major contributing factor. The company continues to face increasing competition from Urbanspoon as well as UK-based companies liveRES Ltd and Livebookings Ltd. And with OpenTable slated to release its earning figures for the third quarter on November 1st, all eyes are on how current economic conditions have affected the company’s core restaurant reservation business. We are specifically on the lookout for the number of diners OpenTable seated over this quarter, and for its costs during this period.

We are currently in the process of revisiting our $84.25 price estimate for OpenTable in light of weak global economic conditions.

See our full analysis for OpenTable here

Slowdown Expected to Hit The Number of Diners Seated

OpenTable seated 23.8 million diners through its online reservation system in the second quarter of 2011. ^[1] Of these, more than 23 million diners were seated in the company’s network of over 22,000 restaurants globally.

With the global economic slowdown impacting consumer spending, a reduction in the number of people eating at full-service restaurants is likely to have declined in recent months. As a result we believe the number of diners seated through OpenTable’s systems could have declined sequentially.

Costs Are Still a Cause for Concern

OpenTable has been working hard to expand its international business in recent quarters, which has resulted in operating costs as well as sales & marketing costs growing faster than revenues. We expect margins for this quarter to be compressed further as a result of the slowing growth in revenue figures.

We will update our forecasts following the earnings call.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. OpenTable, Inc. Announces Second Quarter Financial Results, OpenTable Press Releases, Aug 2 2011 [↩]