Crashing OpenTable's Dinner Party

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Barclays Capital analyst Mark May better be prepared to be seated by the noisy kitchen door the next time he books a dining reservation through OpenTable (NAS: OPEN) .

Shares of the online dining reservations specialist tumbled 9% after May lowered his price target and downgraded the stock.

In slashing the stock's rating from "overweight" to "equal weight," May established $43 as OpenTable's new price target. It was previously perched at $50.


I'll pause now for a few seconds so you can come up with your own joke about an overweight rating on the dining reservations leader.

OpenTable has been able to overcome competitors that are both real and imagined. IAC's (NAS: IACI) UrbanSpoon has been pushing its aggressively priced iPad-based platform. However, fears that Google (NAS: GOOG) would be jumping into this niche with its acquisition of Zagat -- and that Yelp (NYS: YELP) would be the death of OpenTable -- proved overblown. Google has stayed away, and Yelp partnered with OpenTable.

Apple (NAS: AAPL) even threw OpenTable a bone -- a meaty soup bone at that -- when it announced last month that the leading online dining website would be integrated into Siri's next update.

So what's eating May? Well, his channel checks show that reservation growth slowed in the quarter that just ended. He feels that weak industry trends may find OpenTable posting its first ever sequential dip in quarterly revenue.

It's a brazen suggestion, but it's not outrageous. OpenTable has been pushing cheaper options to restaurants that don't need all of the company's bells and whistles. May feels that OpenTable will earn just $1.47 a share this year and $1.60 a share come 2013, well below the consensus average of $1.57 a share and $1.90 a share, respectively.

The neat thing about a bold call like this is that it won't take long to see if May's right; OpenTable reports its second-quarter results during the first week of August.

Drink up
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At the time this article was published The Motley Fool owns shares of OpenTable, Apple, and Google.Motley Fool newsletter serviceshave recommended buying shares of OpenTable, Google, and Apple, as well as creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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