Investors in OpenTable Inc (Nasdaq:OPEN) have delighted in a real feast. Does the San Francisco-based online restaurant reservation service still have value having heated up a whopping 200% since the May 2009 IPO?

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OpenTable Fills Seats
Restaurants seeking ways to drive traffic and cut costs use OpenTable's reservation management services. Reservations are made by diners online for free, using OpenTable's website or smart phone application, and they can choose a restaurant by sorting through OpenTable's searchable options that include types of food, price range and available dates and times. OpenTable earns revenue by charging monthly and per-reservation fees to restaurants for access to the system, plus revenue from advertisements on their websites.

Highlighting the value of OpenTable's expanding network, sequential and annual growth has been outstanding. Fourth-quarter net income rose 65% on strong bookings and new restaurant registrants. For all of 2010, net income nearly tripled, and revenues rose 44%.

Not Overbooked Yet
Strong growth should continue. A higher percentage of smart phones comprising the cellular market will increase OpenTable's exposure to users; smart phone reservations soared 189% last quarter. Additionally, OpenTable is venturing into related businesses that will contribute to earnings. Recognizing the proliferation in group buying coupons, OpenTable now sells third-party restaurant coupons, much like regional services such as ScoutMob.

Offering restaurant coupons is a natural development for OpenTable. Yet global markets represent the biggest opportunity. Overseas revenues, which currently account for about half of OpenTable's business, grew quicker than the North American segment last quarter . The acquisition of U.K. rival Toptable.com will be the near-term centerpiece of that growth story. Toptable.com lets OpenTable compete for European market share with reservation service providers, like Livebookings, that already have a foothold in the U.K., Germany and France.

Dining Out with the Competition
Despite the dominant domestic market share position, OpenTable does face significant competition at home. IAC/InterActiveCorp (Nasdaq:IACI) owned UrbanSpoon's reservation service, Rezbook, will battle directly for OpenTable users. Rezbook has the advantage of having IAC's search engines ask.com and Citysearch to back it up. Regional players are setting the table too, including Southwest-based start up Reservation Genie.

Still, OpenTable has a big leg up in market share and name recognition. Rezbook is going to have to dig deep into IAC's pockets to match OpenTable.

OpenTable is indirectly competing with other, bigger web portals as well. Search giant operators Google (Nasdaq:GOOG), Yahoo! (Nasdaq:YHOO), and Microsoft (Nasdaq:MSFT) already filter information for restaurant seekers. Even GPS hand-held device maker Garmin (Nasdaq:GRMN) prominently features a restaurant finder.

While search engines can sort a lot of information and options, OpenTable's service handles the actual booking of the reservation. Also, OpenTable provides restaurateurs with useful POS integration and client analytics. (From social media and gaming sites to social networking and social buying, many of these websites are fetching multi-billion dollar valuations. To learn more, see What Are Social Media Sites Really Worth?)

The Bottom Line
Valuation has improved since Valentine's Day with the stock correcting 10%. Considering the $15 billion expected value of soon-to-be-publicly traded online buying site Groupon, OpenTable's $2 billion market cap and soaring price-to-earnings multiple doesn't appear as overpriced as the 200% near-two-year rally would indicate.

Just as heated up valuation and competition are concerns, rising energy prices threaten to overwhelm the technology services sector. Consumer spending pressures present a real danger to OpenTable. But new ventures, the growth in smart phone application usage and, most importantly, open markets abroad make OpenTable's fundamental future look tasty.

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