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:

Metric

Coinstar

Operations

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

525

Percent bulls

85.5%

Percent bears

14.5%

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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