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  • climbwitharope climbwitharope Nov 18, 2011 7:32 AM Flag

    My take on the future of Opentable:


    I say you are trying to catch a falling knife and going to hurt yourself.

    With last three earnings reports, Opentable has proved it has hit a wall. It is not growing anymore in revenues (last 3 quarters were the same) and EPS has declined from 27 cents to 17 cents in the last quarter alone. This despite an enormous rise in costs that failed to yield a revenue boost.

    They have announced to expect a "tough" fourth quarter as well. Yet Opentable is still worth almost 7 times the non growing sales. Arguably still a bubble valuation for a non growing company that is declining its profits. The fact that Opentable has already fallen 70% from the top, does not change that.

    They may still be the market leader in their business, but they offer the most expensive product that is now increasingly attacked by cheaper and even free alternatives, causing a severe dissatisfation from customers, which are under pressure themselves by a failing economy. They are fleeing to competitors like Eveve, Urbanspoon and Free bookings.

    It is not only that Opentable is too expensive, but also that many restaurants are not satified with the quailty of its service. But most important: Restaurants now realize they have a (cheaper) choice, which will make it harder for Opentable to attract new customers, not to mention keeping existing ones.

    As we saw from the last conference call, attrition rates (this means leaving customers) are rising for Opentable, and the only way to try and keep their customers is slashing fees, which will impact their bottom line even more. In order to disguise that, they have now begun to highlight NON GAAP earnings, rather than GAAP earnings. Which I pointed out in my recent article:

    You better ask yourself if this company has any chances of survival at all.

    Another issue is that volume has completely dried up over the last few weeks, indicating a lack of interest in the stock. Still, it keeps sagging.

    I have been short since 110 and stay short. My target price is in the low teens. Your article has not changed that position. On the contrary. It will be interesting to see if insiders keep selling their stock as we slowly drift further south. The only upticks are caused by shorts covering, each time to fizzle back, often in the same trading day (look at yesterday). The lower the price sinks, the more shorts it loses, so when the shorts are gone, there is no buoyancy left at all.

    Nevertheless: Good luck with going long.

    By the way, yesterday after hours, I covered my short position in It's always nice to be right, and it sucks to be wrong, Robert. You may want to recall that in a few months, or wise up before taking a bad decision.

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