According to the article in Seeking Alpha there are only 35,000 reservation taking restaurants in US.
With 20,000 customers already using OpenTable there is not much room for growth.
I'm short, but admit that 35,000 seems low. That is only 1 (reservation-taking) restaurant per 10,000 citizens.
If the average restaurant holds 100 patrons, and only 50% of the population frequent these restaurants, that equates to a person eating at a reserved table every 50 days. Seems a bit too infrequent, but not beyond reason.
(Why the heck am I doing some quant analysis. People will keep buying this stock)
35,000 seems like a lot to me. Here in Florida, I can't even think of one in the town where I live, and a lot of restaurant users are retirees, many of whom don't use the Internet.
In fact I just got on the Open Table web site to see what it was about and the nearest restaurant was 40 miles away.
From what I can see the restaurants being promoted are mostly located in large cities and include a lot of pricey Italian restaurants and Brazilian steakhouses.
Probably the real point is that it is more to do with referrals than reservations--a kind of Yellow Pages of restaurants that gets people into restaurants that they might not otherwise know about. The service is much more valuable to restaurants than to diners.
Of course in the long run you are going to pay for the service in the form of padded restaurant bills, but then this is not a service for the poor.
Can the company expand to China and add another million restaurants to the roster? Unlikely, because the US is the only country where diners are so wedded to the car. In other counties people are much more likely to walk to the restaurant or dine close to home.
It looks to me that the stock has to come to earth, but I suppose they may be able to use the high stock price to make acquisitions of businesses that actually make money.
Probably it comes down to whether management can really execute and make money out of this, or whether there just isn't the demand.
What do you mean only 35,000 restaurants?? 35,000 is a ton of restaurants, I mean can you even name 1,000 restaurants? Sure its pricey but the company is still pretty small at under $3 billion. So who cares this stock has been a great market leader giving a nice boost to lots of mutual funds and portfolios. Nowadays its all about finding the next mo mo stock. :)
refer to previous post -- 'interesting overview of OPEN' -- if you can to get much broader analysis of OPEN's business, not just in U.S., but in the rest of the world. This is a growth story that's already in play.
Actually we are referring to the same text.
This is exactly where I found out that the target market in US is already almost entirely taken by Open.
Regarding overseas expansion: do you know what is currently the percentage of the business they are getting abroad?
From the company's VERY OWN Form S-3 Filing with the SEC, they say 30,000, not 35,000:
Restaurant Industry Background
The commercial restaurant industry is broadly divided into "quick-service" and "full-service" segments. We target our offerings to full-service restaurants that accept reservations. We believe based on our internal estimates that there are approximately 30,000 reservation-taking restaurants in North America that seat approximately 600 million diners through reservations annually, though this number fluctuates with economic and other conditions.
I realize americans think the world ends at their borders, but you might think about other countries. Plus, being that they totally dominate the reservations biz, they'll monetize additional avenues for revenues and profits--just like other dominant forces on the web.
The shorts who think that they can calculate future income with straight line extrapolations are going to need a new diaper collection soon.
This is quintessential local business.
Why would any Brit or Frenchmen care to use use the website which allows him to make reservation in WhoKnowsWhereInAmerica?
The same is for Americans, how often do they dine in Europe?
There are absolutely no economics of scale in on line table reservations.
Locals can do the same thing easily.
Can you imagine the cost of customizing offer to gazzilion of dining cultures in Europe?
And save yourself remarks on diapers and similar.
This does not add up.
They would have to sit EVERY meal in these restaurants and it would not fully justify this stock price yet.
While some people and restaurant owners may not care about extra buck, actually most do.
This will limit the penetration rate and cause deceleration in earnings growth.