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Indigestion: Why OpenTable’s Stock is Falling

The 14 percent slide (as of this writing) in OpenTable’s stock today, down to where it was just two months ago, can be tied to at least three things:

OpenTable_200.jpg

First: Growth investors don’t like unexpected, negative surprises. That’s what they got with the company’s announcement late Monday, in conjunction with fiscal first quarter results, that CEO and President Jeff Jordan would resign those posts on June 1 to become executive chairman (whatever that is.)

He’s being replaced by CFO Matthew Roberts, which is fine, but here’s the rub: Roberts will serve as CFO until a replacement is found. That makes the timing of this move seem unusually hasty, unexpected and, as a result, curious at a company that appears to be firing on all cylinders.

Second: When a company’s stock is priced for perfection, like OpenTable , everything has to go just right. That means not simply playing the beat-the-street game, but beating on the financial results front in a big way.

But the beat this quarter was “not a big top-line beat,” wrote Bank of America analyst Justin Post in a note to clients. “OpenTable is a high multiple stock and first quarter revenues at $33.7 million—only beat the street by $300,000.” He adds that the company has “become more complex, which makes it more difficult to assess the underlying strength of the core business.”

Which gets us to point number three: Let's look at the core North American Electronic Reservation Book business. While its installed base is growing, the number of net adds of new restaurants in the North American ERB business appears to have slipped by eight percent sequentially in the quarter—11 percent year-over-year. And that’s assuming attrition of “about one percent,” as the company mentioned on its earnings call, is not far off that mark. Either way, it would appear OpenTable isn’t adding new restaurants as fast as it used to—putting it in “running up the down escalator” mode.

Good time, it would seem, for a growth-oriented CEO to exit, stage left, with a bunch of the company's investors not far behind.

Questions? Comments? Write to HerbOnTheStreet@cnbc.com

Follow Herb on Twitter: @herbgreenberg

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