After announcing that its upcoming results would likely come in below forecasts, Redbox parent Coinstar saw its stock plummet 25% Friday morning. The blogosphere burst to life, with many cackling that Redbox’s alleged weaknesses were finally catching up with it. Not so fast, say several prominent analysts.
Mark Harding, an analyst with Maxim Group, believes that Coinstar’s stock was punished because of overly high expectations:
“A lot of the disappointment with Redbox had to do with expectations being so high as opposed to the actual results being bad. When you look at DVD rentals, the growth is still there,”
Wedbush Morgan analyst Michael Pachter was a little more succinct (and earthier) with his assessment of the situation:
“Coinstar’s biggest problem is they suck at guidance, not that their business is bad . . . They are a good company, but they are subject to growing pains.”
Pachter also believes that Redbox management will learn from their inventory and forecasting missteps and avoid a repeat of this stock punishment in the future:
“In our view, these share losses are unlikely to grow next year, particularly if Coinstar management takes steps to address the inventory imbalances it experienced in Q4,”
D.A. Davidson & Co. analyst John Kraft thinks that Redbox will do better in the future at matching content offering with consumer preferences:
“Management is already learning from its mistakes and claims to have taken a number of decisive steps to better align content with demand,”
The analysts have weighed in, Insiders, and now it’s your turn. Is Redbox really just experiencing growing pains, or is a larger trend emerging that these analysts aren’t addressing?
(via CNN Money and Home Media Magazine)
The near-term market is obviously polarizing.
On one side is VOD which is totally dependent on prerequisite subscribers via service providers. The percentage of subscribers has been stagnant for years @ about 50% of US households. On the other side are those who might rent by discretion for what ever reason, assuming they have a TV and DVD player or capable computer for playback.
One needs only to look at the mix of titles redbox offers. Doesn’t it more closely match the latter side mentioned above?
Redbox is now and will be in the future a *niche* player. Where all it has to do is concentrate on: kiosk location, inventory control and logistical cost containment.
In other words, redbox is a mature company already with very little growth potential.
All that happened was Coinstar didn’t take into account the fact that the 28 day delay was going to carry their December numbers into January. You watch, their 1st qtr 2011 will be higher than expected because of that same delay. It will all work itself out over the next qtr. Traders are just too damn anxious. They ignored the fact that there was still a 36% increase in profit, compared to Blockbuster which loses 50 million in a qtr.
Where in the world is John Small?? He should lap this up.
I hope that they aren’t cutting back too much Blu-ray because there isn’t very many now. I never want to go back to DVD. The Picture Quality is just so nice in HD. That is the reason to upgrade. HD picture for a HDTV
Analysts are desperately trying to defend their incorrect analysis. No surprise here.
I know this is a stretch for this thread, but is applicable to the “weaknesses” and “stock/inventory” : has there been any dialogue about the issue of scratched disks and measures in place to mitigate charging customers for disks that skip.
Not going to happen. Redbox knows most people won’t complain.
I see more of a problem with poor-quality movie releases versus a lack of demand; there are few available movies that I truly want to see being released these days, and the remainder of the bigger-name titles I can rent someplace mainstream (such as at Redbox) are ones I’ve seen many times already or in an edited form via cable-TV. I’d personally like to see more obscure titles stocked, but know many of them will simply take up space in the machines instead of getting rented frequently. I’m also not sold on the idea of “download renting” methods because I am charged for bandwidth usage by my provider and get a worse viewing experience on my computer versus my present TV setup (even though I realize that this is the wave of the future for content delivery). A 28-day delivery exclusion does little to change my opinion of any contemporary movies available.
If more (and better) movies are released (and stocked), movie rentals and sales will also ride that rising tide.
The analysts don’t have a clue on reality. They are paid to speak about companies and don’t necssarily relate to what their sales are or who to. I think they exaggerated the estimate on Coinstar earnings and now complain they didn’t reach them.
what redbox’s cheap a$$ needs to do is bring back the free propmotional codes. cheap bastards like myself havn’t even visited a redbox in months bc there’s no free codes. pretty sure there are people like me around.
Howdy, mostimportant