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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Redbox parent Coinstar (Nasdaq: CSTR ) were off to the races today, adding as much as 26% in intraday trading as investors cheered the company's third-quarter results.
So What: In honor of Halloween, investors seem to have taken on a zombie-like approach to earnings season, repeatedly droning "Beat and raise guidance!" while they make bloody messes of companies that fail to beat estimates and raise guidance. On the flip side, companies like Coinstar, which manage to beat estimates and give good guidance, not only escape zombie destruction but usually end up with soaring stock. For the quarter, Coinstar's earnings per share of $0.66 beat analysts' $0.50 expectation, while its $3.00 to $3.50 forecast for 2011 earnings per share landed well ahead of Wall Street's $2.93 estimates.
Now What: The primary reason for Coinstar's success lately has been its Redbox DVD rental business, which is no doubt benefitting from the struggles at brick-and-mortar rental giants like Blockbuster. Not wanting to be left in the dust by the digital era and competitor Netflix (Nasdaq: NFLX ) , Coinstar has also pledged to announce a digital strategy this month, likely partnering with a company already in the digital business so that it can hit the ground running. Shares of Coinstar hardly look cheap, but then again, shares of companies growing like this rarely do. Particularly after today's heady move, though, investors may want to let the stock cool down a bit before they consider grabbing at it.
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