Although OPEN has been crushing short sellers this past week by rising more than 15% over last week's low, the case for OPEN bears continues to grow:
- The Alexa metrics continue to decline. It's difficult to be fast-growing Internet growth stock while the number of pageviews, pageviews/user, and the average time-on-site are all decining.
- Google+ and Google Places continue ramping up. Google has already made a foray into the world of travel reservations with its purchase of ITA Software and they've been signalling that they're interested in expanding into restaurant, golf course and other reservations. Combine Google's instant social network, Google+, with it's massive directory, Google Places, and you have a tool that will allow you to seamlessly assemble a group for dinner, make a group reservation, buy movie tickets and plan your route. OPEN has so far been operating relatively unopposed; can it handle a challenge from the Mountain View beheamoth?
- Anecdotally, there is rising discontentment among restaurant owners at OpenTable fees.
- Rising commodity and gas prices have consumers looking for cheaper options However, the type of consumer who regularly eats at places that require reservations probably isn't bothered much by having to spend an extra $200/month on gas and food. The bigger danger to Opentable is that the "wealth effect" from rising financial markets appears to be stalling as the effects of QE2 and other stimuli seem to have run their courses.
- Insiders continuing to cash out and dilute shareholder equity. Besides suggesting a lack of faith in OPEN's future and causing dilution, these option exercises are a slow bleed of a few hundred thousand dollars at a time that is one of OPEN's largest expenses. Moreover, OPEN is planning to make large options grants that will also become liabilities and dillute shareholder equity.
Disclosure: Short OPEN via puts of various months.