Opportunity Over at Coinstar?
Grant is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Redbox (a subsidary of Coinstar (NASDAQ: CSTR)) recently announced that they will be coming out with a Disc + Digital Service with Verizon called Redbox Instant. Eight dollars a month gets customers unlimited streaming of movies through EPIX and 4 rentals at Redbox Kiosks, I find the connection with EPIX to be very attractive as that connects them to Paramont Pictures and Lions Gate (Mission Impossible, Hunger Games). Redbox will be able to have these titles available 90 days after release. Also Redbox Instant will be offering electronic sell-through (EST) and video-on-demand (VOD) through video agreements with major studios.
Now that we know what exactly Redbox Instant is I'd like to break each part down. First off we can see this as direct competition to Netflix (NASDAQ: NFLX) with the major difference being that instead of sent through the mail the rentals will be picked up at Kiosks. I for one like this, even though mail requires that the user doesn't have to leave their home, redbox kiosks are everywhere and the ability to get the movie you want, the day you want it, is an advantage.
Comparing prices should give Netflix shareholders a scare. The Redbox Instant Disc + Digital costs only $8 a month, while Netflix charges $8 each for both Disc and Digital, double the price of Redbox. The fact that all of the kiosks are already in place is another advantage. Not to mention the connection with Verizon for streaming videos gives Redbox much lower overhead and the ability to undercut Netflix significantly.
I also am very excited at the fact that the Redbox Instant service will be offering (EST) and (VOD) to cater to the preferences of the younger generations. Instead of going out to get DVD's they would much rather sit at home and rent it through their TV's for a night: personally I can't get over the cost difference and would rather make a run to the Redbox down the block, but when it's my friends parent's money I could care less.
Taking a look at Coinstar stock they are currently at $51.14, a small pop has put them a bit over their 52-week low but still looks like a nice time to buy, but is it? Earnings are projected to keep growing to $5.20 next year, and another encouraging sign Coinstar has only disapointed on earnings once over the past 15 earnings releases. The "Coinstar" part of their business only accounts for 25% of earnings, and though it is a good business I don't see much growth, or in their recent push for a coffee machine serving Seattle's Best. There is concern about the fading of the DVD market, but I feel the Redbox Instant is a great idea as their customer base begins to change to simply streaming; they will be able to still serve those who want DVD's and provide a place to go for streaming when customers make that decision.
Looks to me like there is growth to be had and now might be a good time to get in on Coinstar, what about you?
TeenStockBoss has no positions in the stocks mentioned above. The Motley Fool owns shares of Netflix. Motley Fool newsletter services recommend Netflix. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!