Billionaire Steve Cohen is Liking OpenTable Inc (OPEN) Again

We’d consider Yelp Inc (NYSE:YELP) and Groupon Inc (NASDAQ:GRPN), sources of marketing for local businesses including restaurants, to be OpenTable’s closest peers. Yelp Inc (NYSE:YELP) and Groupon are also somewhat popular short targets, as neither company is profitable on a trailing basis. Revenue has been growing at each company- up 65% in the fourth quarter of 2012 versus a year earlier at Yelp, and 30% at Groupon- and the sell-side is expecting both to be at least somewhat profitable in 2014. However, the P/E multiples are higher than we would like at both companies and so we don’t think that these stocks are good values either right now.

From our perspective, Yelp Inc (NYSE:YELP), Groupon Inc (NASDAQ:GRPN), and OpenTable Inc (NASDAQ:OPEN) are all too expensive at their current prices to be worth buying. Investing in one of these companies is speculating either on the business achieving high earnings growth for a period of several years- high enough to beat analyst expectations, in most cases- or that a cash-rich peer would choose to make an acquisition. There is some chance of a deal, and so potential short sellers should be careful, but large tech companies have had large cash hoards for several quarters and yet there have not been any solid developments. We therefore don’t see what SAC is going for here and would advise against following him into OpenTable.

Disclosure: I own no shares of any stocks mentioned in this article.