Friday, May 22, 2009

More on Opentable

Blodget agrees with AlphaNinja (yesterday's post) that OPEN stock is quickly overvalued.

"Everyone justifiably cheered when OpenTable (OPEN) went public yesterday. In a horrific economy, with wreckage as far as the eye can see, the debut of a real business with a 60% stock pop brought back memories of a happier era.

Unfortunately, those memories included companies that were overvalued by the end of their first day's trading, sometimes wildly so (don't I know it). And at yesterday's closing price, OpenTable has joined that club.

OpenTable is a real business: A steady grower with a clear value proposition, a profitable US business, and plenty of room for growth. It's growing 20%+ in a crappy economy, which bodes well for a cyclical recovery. But unfortunately the stock is already trading at 50X+ 2010 earnings, which leaves little room for disappointment or error.

ThinkEquity, one of the underwriters, is reportedly estimating OpenTable EPS of about 25 cents in 2010. Let's assume that estimate is wildly conservative (underwriter analysts usually set the bar low, so IPO companies can "surprise" on the upside). Let's assume that, in fact, OpenTable will earn at least 50 cents a share in 2010. Then it's trading at 65X 2010 earnings."

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