If there's one thing that investors can count on with OpenTable (Nasdaq: OPEN ) , it's a sweet dessert at the end of every quarterly meal.
Once again, the Web-based restaurant reservations specialist has landed well ahead of Wall Street's expectations. OpenTable's adjusted profit soared 143% to top $8 million, or $0.33 a share. Analysts were bent on ordering the $0.22 a share special of the day after watching it earn $0.14 a share a year earlier.
We've seen this before. OpenTable has crushed Mr. Market's bottom-line targets every single quarter since going public nearly two years ago. Perpetually leaving the pros eating its paprika dust has helped the stock more than quadruple since going public at $20.
The stock isn't moving higher on today's news, though. What's up with that?
Well, maybe they're concerned that OpenTable's installed base -- up 62% over the past year -- is growing faster than both its 61% revenue spurt and the 59% uptick in seated diners. The numbers are nice and beefy, but investors would hate to see OpenTable's restaurant count grow faster than its ability to seat hungry patrons. It would indicate that OpenTable is less effective at the individual eatery level. Thankfully that isn't the case at all.
OpenTable's eatery growth is padded by the 3,680 European restaurants it took on when it acquired overseas rival TopTable last summer. If we zoom in on North America -- where OpenTable derives 84% of its revenue -- we get the clearer picture. OpenTable helped its 13,795 eateries seat 17.8 million diners this past quarter. The 51% uptick in reservations is nearly double the 27% gain in restaurants over the past year.
Can it be the weak subscription revenue growth? There may be something to that. OpenTable's model calls for participating restaurants to pay a monthly fee for the use of its electronic reservation book. It's a Web-tethered enterprise platform that helps map out a restaurant's seating configuration as it merges online reservations with those called in. There's also the reservations-based revenue where OpenTable charges per seated patron.
The disparity was significant between OpenTable's two primary revenue streams. Reservation revenue soared 80%, but subscription revenue climbed by a mere 21%.
OpenTable has been emphasizing the performance-based model since IAC's (Nasdaq: IACI ) Urbanspoon hit the market with RezBook last year. If eateries want a solution with limited upfront installation costs or ongoing subscriptions, OpenTable wants to be there before they turn to smaller yet hungrier upstarts.
At the end of the day, the market's ho-hum response to OpenTable's great quarter is largely the result of a stock that had been scorching in the months leading up to the report.
OpenTable's been on fire since it went public with its Groupon-esque move to sell discounted dining vouchers. Shares of Travelzoo (Nasdaq: TZOO ) and The Knot (Nasdaq: KNOT ) have also taken off since jumping into this high-margin niche.
The hefty appreciation has made OpenTable an easy mark for valuation critics, but aren't they basing their forward multiples on what analysts believe OpenTable will earn? We'll seen how this plays out quarter after quarter.
I hope the bears enjoy humble pie for dessert. It tastes an awful lot like crow.
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