December 20, 2012
When a company successfully transitions from loose change to DVDs, it seems it might be capable of anything. Does that make Coinstar's (NASDAQ: CSTR ) stock a buy now? Or is the declining popularity of DVDs a signal to get out?
To help answer this question, take a look at our new premium report on Coinstar. For a sample of what's offered in the report, below is an excerpt describing three reasons to buy and three reasons to sell the kiosk king.
Three reasons to buy
- Redbox has the largest market share in DVD rentals and a distribution network that has given it relationships with many of the largest retailers.
- Coinstar is innovating away to depend less on its Redbox business with Rubi coffee kiosks and a joint venture with Verizon to stream movies.
- Its coin machines, though they account for only 25% of operating profits, have a 24% operating margin with no competitors in sight.
Three reasons to sell
- DVD and Blu-ray rentals dropped 11% in 2011 -- not a good statistic for Coinstar, which relies on Redbox for 75% of its profit.
- While coffee kiosks can pad revenue, it's unlikely that they can add a significant portion to make up for any large decline in disc rentals.
- Management has burned investors in the past, with a class-action lawsuit alleging that it failed to disclose pertinent information that led to a 40% drop in share price.
More in-depth analysis available
That was a taste from our new premium report on Coinstar. As it gets ready to transition from DVDs to streaming movies, the stock could offer a great buying opportunity -- or that business transition might be a sign to stay away. Our report will help you make that decision. For your copy, click here now.