It’s been a rough day for Redbox parent Coinstar. A couple of major Wall Street firms, J.P. Morgan and Wedbush Securities, have expressed their concerns about Coinstar’s prospects by downgrading the company’s shares and dropping it from a prestigious list, respectively.
J.P. Morgan
In a new research report, J.P. Morgan downgraded Coinstar’s shares to Neutral, citing concerns about the risks the company was taking on and a fear of declining Redbox growth. From the report:
“The stock traded through our $62.00 price target yesterday, has appreciated by 35% year-to-date, and is now trading close to fair value, in our view.
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We are not adjusting estimates, which remain below consensus through 2013, reflecting our view that Redbox segment growth will decline in late 2012-2013, excluding the impact of the planned NCR kiosk acquisition. The pending JV with Verizon and the acquisition of NCR’s kiosks introduces execution risk, in our view.”
Wedbush Securities
Wedbush has decided to remove Coinstar from its “Best Ideas” list for a variety of reasons and risks. From Wedbush:
“Coinstar’s recent share price appreciation (up ? 36% this year) and uncertainty over the potential resolution of several factors expected over the next few months lead us to expect near term share price volatility. The recent price change for standard DVD rentals, increased interchange fees, the introduction of single billing, the re-implementation of a retail workaround for Warner Bros. content, the NCR acquisition, the rollout of the Redbox-Verizon partnership and the decline of Netflix’s DVD business each could have a material impact on Coinstar’s 2012 results, and could cause financial performance to be uneven.”
Is Coinstar, and by extension Redbox, really facing such an uncertain future? Hit the comments and let us know what you think.
[via Benzinga and Market Watch]
This is a classic example of *degrees*. Coinstar had a huge stock run-up during the last fiscal cycle, and is bound to have a correction based on profit-taking.
As far as the future is concerned…
The NCR acquisition is more about *valuation*. What price for a near monopoly in the kiosk DVD rental business versus traditional expansion?
The redbox-Verizon partnership so far has provided very little in the way of actual information and is more about uncertainty than anything else–as Shane mentioned.
I can see a serious problem for Redbox if Universal and Fox decide to implement the same 56 day embargo that Warner did. Redbox would be screwed no matter what they do. Do a workaround and be killed by higher logistic and inventory costs. If they accept the 56 day embargo by all three studios than it will hurt them also.
Redbox will pay out over $1 billion to studios this year. They are not as easy to push around as they used to be.
I’m happy to see someone knows what the heck you’re talking about. Lol.