Joined Jul 30, 2008
2,107 Blog Posts

Open Table: Reservations for Bulls Only

Volume picking up on OpenTable table today signalling a big move coming up.  Before we talk about the price to volume action, let’s talk about the company and see whether OPEN justifies strong bullish momentum.

The first thing I asked was, why would an online restaurant reservation company make so much money?  Well, I couldn’t really answer that question until I realized OPEN reminded me a lot of Priceline or Expedia.  The concept is the same:  create a network of already established businesses in order to expand the customer base.  Of course, OPEN is a little more subtle.  The PCLN and EXPE exprience has much more powerful opportunity costs for the airline companies (an airplane, is usually just an airplane), while in the food industry, the final choice comes down to consumer preference.  Nevertheless, OPEN gives a unique experience to consumers by giving them alternatives within their preference.  For example, you want steak, OPEN tells you that although you love Ruth Chris, it tells you that there’s a Wolfgang’s nearby that’s better for groups.  So a lot of things go on here.  First, there’s product awareness.  To a restaurant, this is a bargain version of advertisemet.  Then there’s the product loyalty, thanks to online community systems offering ratings and recommendations.  Finally, what makes OPEN so good?  Well, they have no competitors.  OPEN basically monopolizes this relatively new technology.  And as more and more restauarants take advantage of the internet to promote their business, OPEN has quite a lot of potential. 

The current marketcap of OPEN about a billion, and the stock is up about 189% from the year’s low.  The first point shows that OPEN still is small, but being up almost 200% means we have to be a little disciplined on buying up this stock. 

Here’s the strategy I’m using: 

1.  Go long term

2.  Buy closer to the 50 MA

3.  Buy on declines, sell on spikes (price without volume)

4.  Buy on spikes (price + volume)

Looking at the year’s chart, OPEN has been seeing quite a lot of action in the past month.  I’m buying some under 70.  Again, I’m concerned about Novembers wide channel.  OPEN has been trading within 18 points so I’m in no rush to buy my full position at once.

So just dream a little.  OPEN could be the next PCLN.  If I didn’t believe OPEN were a $100 stock, I wouldn’t be mentioning it.  I just wish they would do one thing… fix their ugly website!  It looks so crude.  I understand they are keeping it simple for the mobile applications (there’s an Open Table app for Android and iPhone platforms), but still, you got all our money, now go modernize it.

K, have a great day.  Going on a date…

… wait, this is not McDonalds?

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One comment

  1. highsurf

    Going on a date? And Wolfgang’s better for groups?


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