OpenTable Upgrades to Boost U.K. Presence

NEW YORK (TheStreet) -- Having emerged as North America's undisputed leader in the online restaurant-reservation industry, OpenTable (OPEN) is now trying to replicate the success across the Atlantic.

The company is focusing on full-service reservation-taking restaurants in the U.K. and is looking to capture more market share from competitors like liveRES and Livebookings by pepping up the online reservation service it offers through its toptable.com Web site. OpenTable recently redesigned its toptable.com Web site to enhance its functionality for both diners and restaurants.

We maintain a price estimate of $54 for OpenTable's stock, which is a near 25% premium to its current market price. We believe there are several untapped potential revenue sources OpenTable will realize in the years to come. Also, the current market prices are quite depressed as a result of the deteriorating European debt crisis.

In recent years, OpenTable has worked on expanding its operations overseas to countries with large numbers of online consumer transactions and reservation-taking restaurants -- a strategy that took it selectively to the U.K., Germany and Japan. The considerable costs involved in the expansion and the opportunity presented by toptable.com led to OpenTable acquiring the business that had made a name for itself in the U.K. OpenTable completed the acquisition of toptable.com on October 1, 2010, for $55 million.

Since then, toptable.com has contributed to just about two-thirds of the revenue generated by OpenTable through reservations at international restaurants. The Web site also rakes in a good chunk of OpenTable's advertising revenue.

It is only natural then that OpenTable improves its toptable offering -- something it completed earlier this month by integrating OpenTable's technology to the original toptable.com Web site. The company believes the upgrades will help restaurants "manage their bookings more effectively, enhance their service levels, seat more diners."

The company also claims that diners would now have a significantly better "selection, review and reservation experience" while using the Web site, and this is clearly aimed at drawing more diners to use toptable.com.

Our estimates for the number of diners seated through toptable.com are shown in the chart above, and you can modify that to better understand the impact of an increase or decrease in this number on OpenTable's total value.

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