1-Star Stocks Poised to Plunge: OpenTable?

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Based on the aggregated intelligence of 135,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, online restaurant reservation service OpenTable (Nasdaq: OPEN) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at OpenTable's business and see what CAPS investors are saying about the stock right now.

OpenTable facts

Headquarters (founded)	San Francisco, Calif. (1998)
Market Cap	$660.5 million
Industry	Internet software and services
TTM Revenue	$58.6 million
Management	CEO Jeffrey Jordan (since 2007) CFO Matthew Roberts (since 2005)
TTM Net Income Margin	(1.0%)
Enterprise Value / EBITDA	118.2
Competitors	Restaurant.com SavvyDiner.com
CAPS members bearish on OPEN also bearish on	Microsoft (Nasdaq: MSFT) Google (Nasdaq: GOOG)
CAPS members bullish on OPEN also bullish on	Palm (Nasdaq: PALM) Goldman Sachs (NYSE: GS) Citigroup (NYSE: C)

Sources: Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS. TTM = trailing 12 months.

Over on CAPS, 47 of the 59 members who have rated OpenTable -- some 80% -- believe the stock will underperform the S&P 500 going forward. These bears include All-Stars finabuddy and N6MAA10816, both of whom are ranked in the top 10% of our community.

Just last month, finabuddy voiced reservations about the stock's built-in expectations:

After glancing over their financials, I can vividly see the [investment bank] analysts projecting the revenue growth and increasing [EBITDA] margins out a few years. The company doesn't look bad, but I typically don't like revenue/growth stories like this. Biotech companies with more EBITDA and a huge drug in late phase III have less market cap than this stock.

In an earlier pitch, N6MAA10816 draws another bearish comparison :

They really don't have a large moat around their business.

In some ways, they're kinda like [TiVo (Nasdaq: TIVO)]. ...

Their revenue base is based on subscriptions. In the case of OpenTable, they also make money from reservations made through their system. So, both companies are as only good as their ability to increase their customer base. And both companies will eventually hit a saturation point and hit a revenue generation brick wall.

That makes me question [OpenTable's] long term business strategy. Do they have one apart from increasing their international presence? I'm not really enthusiastic about their future.

What do you think about OpenTable, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. More than 135,000 investors are waiting to hear what you have to say. CAPS is 100% free, so simply click here to get started.