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OpenTable: Acquisition Target for Google?

Posted on Friday, Mar 16th 2012

According to industry research, within North America, of the 300,000 full-service restaurants, there are nearly 55,000 that accept reservations. However, not all of them have signed up with a reservation services provider like OpenTable. Analysts believe that North America accounts for a quarter of the global restaurant industry, making international markets an even bigger opportunity.

OpenTable’s Financials
OpenTable (Nasdaq:OPEN) saw revenue grow 21% over the year to $37.2 million, ahead of the Street’s target of $36.8 million. EPS of $0.37 was also higher than the market’s projected earnings of $0.30 per share.

By segment, reservation revenues grew 32% over the year to $20.3 million. Over the same period, subscription revenues grew 14% to $13.3 million, and other revenues were down 5% to $3.6 million.

At the end of the quarter, nearly 25,120 restaurants spread across North America and Europe used OpenTable’s website and mobile apps for reservations. Restaurants in North America grew 24% over the year to 17,150 and the number in Europe grew 27% over the year. OpenTable’s platform helped seat more than 26.9 million diners during the quarter, impressive growth of 39% worldwide. The number increased more than 38% in North America and 45% in Europe.

The company ended the year with revenues growing 41% over the year to $139.5 million, and EBITDA increased 59% over the year to $55.4 million.

For the current quarter, the market estimates revenues of $40.1 million with EPS of $0.34. The Street expects them to end the year with revenues of $170.9 million and EPS of $1.51.

OpenTable’s Mobile Expansion
OpenTable continued to expand their mobile presence and recently released an app for Kindle Fire. The app lets users find and book tables at nearby restaurants. Users can filter their search by neighborhood, cuisine, or price and access photos, maps, reviews, and other information about the restaurant. Since OpenTable’s mobile app launch in 2008, the mobile apps have helped make dining reservations for nearly 20 million diners and contribute more than $800 million in business for the restaurants.

OpenTable’s Competition
Meanwhile, OpenTable’s competition is on the rise. Last year, Google acquired their partner Zagat. OpenTable has partnered with Zagat that lets Zagat’s users make reservations through their platform. Analysts estimate that Zagat accounts for 5%-10% of OpenTable’s traffic. If Google were to pull the plug on the partnership, OpenTable will likely lose some market share. The other option is for Google to acquire OpenTable, since they seem to be serious about being in the restaurants review business. I am sure, they can drive a lot more traffic to OpenTable if they wanted to.

Besides Google, last quarter, Eveve, a European player, tested the restaurant reservation market in the Twin Cities area. Within five months of operations, the company claims to have gotten 20% of OpenTable’s business in the market.

The stock is trading at $40.30 with a market capitalization of $916.7 million. It touched a 52-week high of $118.66 in April 2011.

 

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