3 Reasons to Avoid Outerwall Stock

By Demitri Kalogeropoulos – Oct 9, 2013 at 4:25PM

NASDAQ: OUTR

Outerwall Inc.

This stock is rising for all the wrong reasons.

Outerwall (OUTR) shares are on fire lately, up more than 20% since an activist investor unveiled plans to push management for a sale or other potential strategic changes at the company. However, Fool contributor Demitrios Kalogeropoulos isn't buying right now.

In the video below, Demitrios gives three reasons to avoid Outerwall stock. First, weakness in the Redbox DVD rental business adds a lot of uncertainty around the company's main cash cow. Second, Netflix (NFLX -3.92%) isn't shedding DVD subscribers at nearly the pace it was last year, removing a big tailwind from Outerwall's business. And third, it's hard to see where growth will come from over the longer term as the overall DVD rental market continues to shrink.

Fool contributor Demitrios Kalogeropoulos owns shares of Netflix. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. 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.