When a company successfully transitions from loose change to DVDs, it seems it might be capable of anything. Does that make Coinstar's (NASDAQ:OUTR) 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.
Fool contributor Dan Newman has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. 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.