Why should investors in publicly traded technology stocks pay attention to what is going on in the world of startups and venture capital? It isn’t just that venture capital generates companies that do IPOs. Rather, because these markets can help provide signals as to what investors are interested in. A great example is OpenTable.* The company reported better than expected earnings last night. OpenTable, like its technology cousin Netflix, is undoubtedly a momentum favorite at the moment, and should be treated (and traded) accordingly. Howard Lindzon points out how the company represents a publicly traded version of what so many startups are trying to achieve in the intersection of commerce and social media. The outsized valuation on OpenTable may make sense in that light. That doesn’t mean the stock won’t reverse course, but the high priced stock does give the company additional flexibility in executing its business plan. In today’s screencast we note the links between the public and private markets.
*No position in OpenTable.
Items mentioned in the above screencast:
OpenTable (OPEN) beats expectations. (Fund My Mutual Fund)
OpenTable shorts got crushed this morning. (Clusterstock)
Daily chart of OpenTable. (Finviz)
Why OpenTable is a “liquid, public version” of so many of today’s startups. (Howard Lindzon)
Andreesen Horowitz notes the significant rise in startup valuations. (NYTimes, GigaOM)
Update: Herb Greenberg at CNBC highlights some issues with the OpenTable business model.