(By Balaseshan) Oppenheimer & Co. analyst Jason Helfstein upgraded rating on shares of OpenTable Inc.
) to "Outperform" from "Perform" with $46 price target, saying he sees greater chance of positive catalysts.
Helfstein is upgrading OPEN shares as 2Q results and guidance suggests near-term revenue stability, and he sees the potential for upside in 2013 as the company focuses on improving U.S. conversion rates and its mobile products.
The analyst noted that the company's 2Q EBITDA increased 21%, 7% above guidance, and management forecasts similar fiscal year growth. Global diner growth was 27% year-over-year versus 34% in 1Q, but could accelerate post the Top-table integration and U.S. conversion initiatives.
Helfstein said guidance for 3Q and 2012 assumes consistent year-over-year revenue growth. Margins slightly lower sequential on modest headcount investments and a small acquisition. The plan is still to re-deploy engineers to mobile and conversion initiatives.
As guidance suggests stable trends, the analyst sees a greater chance of OPEN delivering positive surprises, with the London Olympics, diner conversion and mobile as the key initiatives. He believes many investors have been sidelined, and this report will bring money back to the stock.
While Helfstein's $46 price target is unchanged, it implies 22% upside potential from the after-hours price of $38 or 35% from the closing price. His target assumes 12 times 2013 EBITDA or a 23 times price-to-earnings, still well below its nearest comparable HomeAway (NASDAQ:AWAY) at 17 times and 34 times consensus (FactSet) respectively.
The brokerage lowered its 2012 EPS estimate for OpenTable to $1.59 from $1.60, while increasing its 2013 estimate to $2.04 from $2.01.
OPEN is trading 18.18% higher at $40.36 on Friday.