OpenTable has a price estimate of $52
Gogobot integration helps the stock's valuation, but superstorm Sandy fallout doesn't.
This is a welcome piece of information for investors in the online restaurant-reservation website who were not too impressed by the fact that OpenTable shaved off about $2 million from the higher side of its revenue estimate for the year -- with Hurricane Sandy blamed for half a million in lost revenues.
The tie-up with Gogobot grants the more than 2.5 million users registered on the social trip planner access to OpenTable's reservation services. We maintain a $52 price estimate for OpenTable's stock, about 20% above the current market price as we believe that there are several untapped potential revenue sources that OpenTable will realize in the years to come.
Often quoted as the next big thing in the online and social travel space, Gogobot has seen remarkable growth this year. The website grew its customer base from under a million users this May to more than 2.5 million within six months. And while the website is diversified in its offerings related to travel -- accommodation as well as dining -- restaurants undoubtedly are an important aspect of Gogobot's user experience. The tie-up with OpenTable is, hence, a positive step forward for both companies.
The deal also comes at a good time because in recent quarters investors have been quite vocal about their view that OpenTable's growth engine has been running out of steam. A growing number of competitors in the U.S. and internationally -- primarily U.K. -- and an increasing expense tab has put OpenTable's margins under considerable pressure.
And while it must be noted that historically the third quarter is a slow period for the restaurant industry as a whole, investors are concerned about the number of diners seated by the company in North America, which was 2% lower this quarter than in the previous quarter (27.4 million in the third quarter vs. 28 million in the second).
OpenTable is also expecting a slow fourth quarter, evidenced by CFO Duncan Robertson's admission during the third quarter conference call that October saw a 1% year-on-year decline in diner count. Superstorm Sandy is only going to drag down the diner count further.
Tie-ups and partnerships like the recent one with Gogobot or the ones OpenTable has maintained for a while now with Google (GOOG), Menupages, TripAdvisor (TRIP), Yahoo (YHOO), Yelp (YELP) and Zagat among others are becoming increasingly important for OpenTable as they offer an inexpensive channel to bring in additional diners at a time when the company is battling spiraling costs.
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Despite the lower stock price, it isn't the right time to take another bite. Here are 4 reasons why.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.