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OpenTable (Nasdaq: OPEN ) is back. I hope you made your reservations.
The restaurant reservations leader posted encouraging fourth-quarter results last night. Revenue climbed 21% to $37.2 million, just ahead of the $36.8 million that analysts were targeting. Earnings -- adjusted to back out stock-based compensation and acquisition-related expenses -- clocked in a better-than-expected $0.37 a share. Wall Street figured that OpenTable's profitability would fall to $0.30 a share from $0.33 a share a year earlier.
The model's working. There are now 25,119 restaurants throughout North America and Europe leaning on OpenTable for website and mobile app reservations, 25% more than the prior year. The number of diners seated through OpenTable's platform soared 39% during the quarter to 26.9 million. In other words, the average OpenTable restaurant is attracting more bookings than before.
Why go elsewhere?
The competition is certainly hungry and ready to pounce. IAC's (Nasdaq: IACI ) Urbanspoon issued a blog post hours ahead of OpenTable's report, likely hoping to steal the market leader's thunder by announcing an 80% uptick in traffic and the ability to book 1,200 different restaurants from its website and related app.
Really? Obviously there's enough growth here to share -- and this is a market that may get even more crowded in time. We still don't know if Google's (Nasdaq: GOOG ) acquisition of Zagat last year is merely about just beefing up its local restaurant ratings or if Big G has ressies in mind. The "check-in" craze that Foursquare and Facebook have championed also naturally lends itself to Web-based bookings.
However, one can also argue that OpenTable and Urbanspoon are growing at a time when dining out is in a post-recessionary lull. What happens when consumer confidence improves and reservations-based eateries grow even more crowded?
We're a far cry from where OpenTable was last quarter. Shares of the dot-com speedster got smoked after seated diners slipped sequentially for the first time in three years. Adjusted earnings merely matched Wall Street expectations after consistently blowing the pros away on the bottom line every single quarter before that. Revenue growth came in a bit light. After giving the Groupon (Nasdaq: GRPN ) "flash sale" model a shot in a move that proved costly, confusing, and alienating to some restaurant partners, OpenTable nixed its Groupon-like Spotlight offerings late last year.
The third quarter hurt in many ways, but now OpenTable is turning the tables on the bears.
Things still aren't perfect. OpenTable continues to lose money in Europe, though the deficit is getting smaller. The average international restaurant is getting just 276 seated patrons during the quarter compared to 1,434 diners per domestic restaurant, but the seated diner metric is growing faster than participating restaurants in both territories.
In a welcome piece of opportunistic repurchasing, OpenTable snapped up nearly 1.1 million shares at $37.91 during the fourth quarter. The stock is trading well above that now.
The last course was rough, but OpenTable's back to serving something meaty.
Shares of OpenTable have nearly doubled since I recommended the stock to Rule Breakers newsletter subscribers three years ago, but now it's time to discover the next rule-breaking multibagger. It's a free report. Want it? Get it.