J.P. Morgan analyst Paul Coster has cut his rating on shares of Redbox parent Coinstar from Underweight to Neutral. Coster believes that Redbox is approaching a saturation point in the DVD rental marketplace, with nearly three-fourths of the U.S. population now within a 10-minute drive of a Redbox kiosk.
Coster thinks that the DVD kiosk market may be peaking as the machines become ubiquitous and streaming viewership continues to grow. Said Coster:
“We think the Redbox business can grow in 2013, owing to further market-share gain from Blockbuster and Netflix, but we think the secular trend is clear, and 2014 is likely to demonstrate that the DVD rental market is entering a decline phase.”
Is Coster right on the money here, or can Redbox continue to grow for the foreseeable future?