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By Neal Rau

Headquartered in California, OpenTable Inc's (NASDAQ:OPEN) is available throughout the United States, as well as in Canada, Germany, Japan, Mexico and the UK, making it the world's leading provider of online restaurant reservations. The company's revenue is derived mainly from online reservations and subscriptions. The stock is up about 43% YTD, even after a pullback from yearly highs in early September, but is the stock a buy, sell or hold?

OpenTable provides specialized hardware and software to its restaurant clients. Restaurants that use its Electronic Reservation Book pay a one-time installation fee for installation and training, as well as a monthly subscription charge of $249 per month.

OpenTable reported in August that its second-quarter profit increased 46% beating market expectations, helped by improved revenue. However, the company gave weaker guidance for Q3 and cut its forecast for the rest of the year. While 2Q US revenues were in line, Intl revenues were weaker than expected on changes to promotional pricing. The stock fell sharply when the company announced the weaker guidance in early August, but the stock managed to rally to yearly highs less than a month later. Currently, the stock is trading about 8% off those highs, and getting close to a test of support, according to the Stock Traders Daily real-time trading report.

Last month Facebook Inc (NASDAQ:FB) announced that it entered into a partnership with OpenTable, which allow users to book restaurant reservations from the Facebook mobile app. Now, when people visit a restaurant's Facebook page, they can book directly from the page without leaving to go to another app. Facebook's gigantic user base could boost OpenTable's users quickly and help OpenTable deal with the growing competition from the likes of Groupon Inc (NASDAQ:GRPN) and Yelp Inc (NYSE:YELP) in the online restaurant reservation industry. OpenTable also made a recent acquisition, acquiring RezBook last month. The move was likely to counter Groupon's acquisition of Savored a year ago, and Yelp's buyout of SeatMe a few months ago.

Perhaps the most important aspect of the FB partnership is the potential from mobile. Matt Roberts, President and CEO of OpenTable said during the most recent conference call that 38% of the company's seated diners now originate from smartphones and tablets, and mobile remains a strategic focus for the company, which is continuing to invest in mobile product optimization and adoption. Competitor and partner Yelp said its advertising from local businesses jumped 77 percent to $44.8 million, or 81 percent of total revenue in the second quarter.

OpenTable benefited from its partnership with Yelp, which was established back in 2010. The partnership allows Yelp visitors make a restaurant reservation directly from the business page of customers. It is appealing to restaurant owners because they can drive people to their business page and let them reserve a table without leaving the site. Although Yelp bought SeatMe, another restaurant-reservation startup, the company said it would not affect its relationship with OpenTable. Yelp needed to open up the reservation space for smaller restaurants and nightlife establishments that couldn't afford a high-end solution like OpenTable.

OpenTable still stands to benefit from its more than 600 partnerships with companies like TripAdvisor, Google and Yahoo. The company also has room to expand internationally, as it needs to compete with the UK Company Livebookings, and Barcelona based Restalo, which is the leader in online restaurant reservations in Italy and Spain, where OpenTable is yet to operate. As long as OpenTable continues to invest in mobile product optimization and keeps adding partners both in the U.S. and abroad, the stock has upside, but expectations for international revenue may have been too high, and the recent adjustments could be baked into the stock now.

The stock has recently been moving closer to support, however, we prefer to buy near support levels when they are tested because that allows us to maximize our return, as our target is resistance. Our goal is to get the complete oscillation from support to resistance, but it also helps us control risk, and that is the most important part. Based on the Stock Traders Daily real-time trading report, the stock has not tested support yet, so there might be some near-term downside ahead, but if the stock does test support, we would be buyers as long as those support levels hold.

Source: OPEN To Opportunities? Buy If Support Is Tested