Netflix (Nasdaq: NFLX) had better start taking Coinstar (Nasdaq: CSTR) seriously. Last night, the company behind the Redbox DVD kiosks easily beat Wall Street's first-quarter financial projections and issued better-than-expected guidance.

We'll get into the details of Coinstar's Q1 results momentarily. First, here's a closer look at the business from a Foolish perspective:




Specializes in retail storefront kiosks for coin counting, toy and snack vending, and DVD rentals. The company acquired the Redbox concept in 2009.

CAPS stars (out of 5)


Total ratings


Percent bulls


Percent bears


Bullish pitches

87 out of 107

Highest rated peers

Matthews International, Hillenbrand, Sotheby's

Data current as of April 29.

Coinstar's $424 million in first-quarter revenue easily topped the $410 million analysts were looking for. But it was the profit picture that really impressed. Adjusted earnings rose 53% to $0.46 a share, more than double the $0.22 analysts were expecting.

Looking ahead, management said it will begin renting video games in June and expects $430 million to $450 million in revenue and $0.76 to $0.86 a share in adjusted profit in Q2. Here, too, Wall Street was well off the mark. The implication? My DVD stupidity isn't widely shared.

And while Comcast (Nasdaq: CMCSA), DIRECTV (Nasdaq: DTV), and DISH Network (Nasdaq: DISH) are like Netflix in betting on on-demand, all signs point to continued demand for low-cost DVD rentals. Will the same dynamic work for video game rentals? GameStop (NYSE: GME) had better hope not.

Do you agree? Disagree? Tell us what you think about Coinstar's report, approach, and competitive differentiation using the comments box below. You can also rate Coinstar in Motley Fool CAPS.

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Netflix is a Motley Fool Stock Advisor selection. Sotheby's is a Motley Fool Hidden Gems pick. Hillenbrand is a Motley Fool Income Investor recommendation. Motley Fool Options has recommended writing covered calls on GameStop. Alpha Newsletter Account LLC has purchased Netflix puts. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. 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 owns shares of GameStop and Hillenbrand and is also on Twitter as @TheMotleyFool. Its disclosure policy is moving on. Next!