When Redbox parent company Coinstar put up some underwhelming numbers for the second quarter, investors punished the company’s stock and there was some definite concern about the company’s long-term prospects. Worry not, says Wedbush Morgan analyst Michael Pachter, who considers Coinstar’s Q2 numbers to be a just a blip, rather than a harbinger of things to come.
“Although operating margin did suffer in Q2, we expect it to increase in the long-term as the company’s distribution agreements allow Redbox to purchase more copies at lower prices . . . Despite the lower comp, we think that Redbox’s demise has been greatly exaggerated.”
Redbox’s recent distribution agreements will result in substantially lower average cost of new DVDs for the kiosk renter, says Pachter:
“We estimate that the all-in cost of movies under these wholesale arrangements (net of the sale of previously-viewed merchandise) will be approximately $6 per disc lower [than what it was before the deals],”
Pachter also believes that an announcement of a major retail agreement with a large chain such as Target is in the offing, which would allow Redbox to pick up the pace of its expansion.
Merriman Curhan Ford analyst Eric Wold is also bullish (is he ever not?) on Redbox, pointing out that the company’s rental market share grew from 18% a year ago to 25.2%. Wold called the second quarter’s numbers an “anomaly”.
Do these analysts have it right, Insiders? Will Redbox’s continued expansion and agreements with studios get the company’s financials back in line with investors’ expectations? Any predictions for Coinstar’s Q3 numbers now?
(via Home Media Magazine)