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Coinstar Shares Plunged: What You Need to Know

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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: Coinstar (Nasdaq: CSTR  ) dropped 10% in intraday trading today after guiding second-quarter revenue below expectations and announcing the departure of a key executive.

So what: Management expects revenue of $434 million to $436 million for the second quarter (which ended in June), below the consensus forecast of $446 million. The president of its high-growth Redbox DVD vending machine unit has resigned "to pursue entrepreneurial and other interests, and will continue to serve as president until a successor is named."  

Now what: EPS guidance of $0.96 to $1.00 for the second quarter and $2.90 to $3.15 for 2011 compares favorably with the consensus estimates of $0.81 and $3.02, respectively. But second-quarter revenue grew only about 27%, a marked slowdown. The latest guidance was buried in one of three press releases from the company, suggesting management was trying to slip one past investors. Guidance anticipates a record fourth quarter and appears to rely upon both the timing of new releases to Redbox kiosks and the planned deployment of Safeway (NYSE: SWY  ) coin kiosks that were announced in June. That's a lot of risk for a stock with slowing growth and a P/E ratio of 27 times after today's sell-off.  

Interested in more info on Coinstar? Add it to your watchlist by clicking here.

Fool contributor Cindy Johnson does not own shares of any company named above. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On July 22, 2011, at 5:35 PM, SwiperFox wrote:

    Get out while you can. All those folks claiming that they were going to leave Netflix aren't going to leave Netflix.

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    Three in our extended family just left Netflix

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