OpenTable (OPEN) has had quite a year. From $45 this stock took off like a rocket as triple-digit profits pushed this stock way-higher than it should have been. OPEN is one of those names that needed to fall.
Last quarter OPEN’s P/E was 82. Whew.
One-Year Chart
This quarter the stock has come back towards reality. After hitting a 52-week high of $119 in late April, OPEN has dropped to a more reasonable $74. Although this is good, its not great as the P/E is still too high (63).
Last quarter, profits surged 100% and revenue grew 61%. The number of booked tables grew 59%, and the number of restaurants that uase OenTable for reservations jumped 62%. Operating margin frll from 22% to 18%.
The negative is Annual Profit Estimates only inched higher (view the ten-year chart here). That’s not enough to support an inflamed P/E in the 80s — or maybe even in the 60s.
Profit growth the next four quarters is estimated at: 80%, 30%, 9%, 46%. So after next qquarter slower growth is expected, but OPEN’s been whipping estimates so I think we’ll be OK.
Fair Value
I think OPEN continues to be worth 40 times earnings. I almost bumped it up to 45 times but annual estimates barely moved.
With these figures in place, OPEN is still overvalued.
Bottom Line
The bottom line is OpenTable is one of the best young companies around. It makes money off each reservation patrons place online through its system. There’s great growth opportunity in selling gift certificates at a discount like Groupon does, so I’d like to own this stock. I hope it keeps falling, somewhere in the $50s would be a good place to step in.
