Coinstar Shares Plummet14 Jan, 2011 By: Erik Gruenwedel
Coinstar Inc.’s pre-announcement of poor fourth-quarter results and lowered fiscal 2011 guidance due to shortfalls with its Redbox subsidiary sent investors heading to the turnstiles Jan. 14.
The coin changing company’s stock lost more than 27% of its value in afternoon trading, despite comments from several analysts who characterized the setbacks as temporary.
Eric Wold, analyst with Meriman Curhan Ford in New York, told CNBC Redbox management’s inability to monitor inventory levels in kiosks, forecast consumer behavior, especially during the holidays, did not bode well.
“Clearly, management has had it wrong now for three quarters in a row,” Wold said.
The downturn will likely be seen as a major victory by Warner Home Video, 20th Century Fox Home Entertainment and Universal Studios Home Entertainment — the three major studios that embargo new release content 28 days from kiosks and Netflix.
Continued revenue downturns could also lead Redbox to reconsider exclusive (and expensive) distribution deals with Sony Pictures Home Entertainment, Paramount Home Entertainment and Lionsgate, among others.
Regardless, some analysts said the share price devaluation represents a good stock acquisition going forward.
“If investor pessimism continues, Coinstar's shares start to look interesting — even for non-growth-investors like me,” wrote TheMotleyFool.com’s Matt Koppenheffer in a post.