) is the largest provider of free and real-time online restaurant
reservations for diners in the U.S. It competes with Urbanspoon,
owned by IAC/InterActiveCorp (
) and other UK-based companies like liveRES Ltd and Livebookings
OpenTable's share price has grown nearly three-fold from a
roughly $30 value following its IPO in May 2009. The stock's
current market price stands around $85. The stock price actually
breached $95 earlier this month, soon after the company declared
better-than-expected earnings for the fourth quarter of 2010.
our price estimate for OpenTable stock to $94.90
after the earnings release, taking into consideration the value
that exists in the online-restaurant reservation market around the
world, and also the value OpenTable stands to gain from the sale of
online restaurant discount coupons.
The revenue generated by OpenTable by diners making reservations
through the OpenTable website, the restaurant's website, or even
through OpenTable mobile phone applications are the biggest source
of value for the company. Our analysis shows that almost 60% of
OpenTable's value can be attributed to reservations.
Below we highlight upside and downside scenarios for our
OpenTable price estimate based on the outlook for drivers affecting
the company's reservation revenues.
12% Downside - Slow Increase in Number of Diners Using
OpenTable for Reservations
OpenTable has seen substantial growth in the recent past from
the number of diners using the OpenTable system to book tables
online. The number of diners in North America making reservations
through OpenTable has increased from 24.6 million in 2007 to 62.4
million in 2010. This corresponds to an increase in the number of
diners per North American restaurant making reservations through
OpenTable from 3,330 in 2007 to more than 4,500 in 2010.
We estimate that the number of diners per North American
restaurant (using OpenTable) will increase rapidly from its current
level and reach 10,700 by the end of 2017. This corresponds to a
20% annual growth in the number of diners using OpenTable, to more
than 250 million in 2017.
Should our 20% annual growth forecast prove aggressive, and the
pace instead falls closer to 15%, the number of diners per North
American making reservations through OpenTable would reach roughly
8,000 by the end of our forecast period. This change shaves off
almost 12% from our estimated share value, bringing the value to
less than $84.
5% Upside - More Diners Using OpenTable.com than Using
OpenTable charges restaurants 25¢ per diner who reserves a table
through the restaurant's own website, and $1 per diner who reserves
through the OpenTable website or using the OpenTable mobile
application. Through this pricing structure, OpenTable has seen an
increase in revenue per diner from 68¢ in 2007 to 71¢ in
In estimating the revenue per diner for years to come, we assume
a 15% growth in the number of diners using restaurant websites, and
a 30% growth in the number of diners using OpenTable.com and the
OpenTable mobile application. This led to our conclusion that
OpenTable's revenue per diner will increase to 79¢ by
But if the number of diners using OpenTable's site or mobile
application to make reservations increases to even 32%, the per
diner revenue could increase to 87¢ by 2017. This would imply a 5%
upside to our
$85 price estimate
, bringing our number very close to the $100 mark.