He raised his price target to $80, increased his estimates for earnings, and says the company has "multiple growth opportunities."
He says the company experienced the "fastest core growth in our coverage sector."
Here's the bullet points from his report:
- OPEN Reported An Acceleratingly Strong Q3 ----- Revenue/Adjusted EPS of $24.5MM/$0.23 was ahead of the Street at $23.1MM/$0.15. OPEN ended the quarter with 15,246 Total Restaurants, up an accelerating 31% Y/Y, and had 15.9MM Seated Diners, up an accelerating 54% Y/Y.
- Positive Fundamental Trends-- 44% Y/Y rev growth was an acceleration vs. Q1 at 33% Y/Y & Q2’s 37% Y/Y growth. EBITDA Margin expanded by more than 11 points Y/Y to record high 36.7%. EBITDA grew 111% Y/Y – fastest core growth in our coverage sector. Clearly justifies a premium multiple.
- Multiple Growth Opportunities – 1) OpenTable Mobile seated 1.6MM diners in Q3 – 10% of its total diners (vs. 8% in Q2); 2) OPEN signed up 453 restaurants to its new OpenTable Connect offering in Q3 (vs. 200 adds in Q2); 3) Recent Toptable acquisition accelerates path to international profitability – we now model ’12 vs. ’13 previously for International profits; and 4) Advertising, Private Dining, Spotlight or daily deal coupons, and Phone reservation as a new channel thru Table Maestro acquisition – all material growth opportunities.
- Increasing Estimates, PT increased to $80 — Increasing ’10 Rev by 4% to $97MM and ’10 EBITDA by 9% to $34MM. $80 PT = 20X ’12 North America EBITDA of $75MM plus $14 per share for International segment.
- Reiterate Flywheels Buy — Consistent with our 9/12 Upgrade Note, our OPEN Long Thesis remains: 1) Significant secular growth opportunity; 2) Scalable model; 3) Distinct Cyclical Recovery Play; 4) A clear play off of Mobile ‘Net; & 5) New revenue streams with Advt, Pvt Dining, & Spotlight. & 5) One of Internet Small Cap’s best Managements. What OPEN has proven is that it has created a dominant transactions platform on which in can layer in new, high-margin revenue streams. Impressive.
Disclosure: No Positions