CSTR -30% NFLX is next?

Coinstar, which operates Redbox DVD kiosks, said it now expects fourth-quarter profit in the range of 65 cents to 69 cents a share, from prior outlook of 79 cents to 85 cents.
This comes as its preliminary fourth-quarter increased less than expected, reaching $391 million, compared with a forecast between $415 and $440 million.
Coinstar attributed its lackluster results to weaker demand from titles scheduled to release during the holiday season. This also marked the first holiday season with 28-day delayed titles. Coinstar also expected higher-price Blu-ray titles to perform better.

Shares of Coinstar are DOWN -30%

 

As I posted in September of 2010, this is just a trend that will not last, this stock is still overvalued by a large amount of dollars, this stock will be going a lot lower over the next 2 years, thinking possible single digits.



S2007S


Registered: Aug 2006
Posts: 11994


09-03-10 04:55 PM

Noticed CSTR rang the opening bell at the nasdaq today so I wanted to update where I think the future of this company is heading and I dont think its going to be too long before this company is trading a lot lower than it is today, and here are my reasons:


"Through Redbox, Coinstar operates DVD kiosks at 26,900 locations in the U.S., including grocery stores, drug stores and McDonald’s Corp. restaurants. The unit accounted for $271.9 million, or 79 percent, of the company’s $342 million in second- quarter revenue, the company said in a statement in July."

Fortune named this company one of the fastest growing companies in 2010 numbering it 61 out of 100, now lets push that aside because this might be the last year its on this list and why, because DVD kiosks are going to disappear over the next 5 years or quicker as movies will be streamed right to your computer and or 82" big screen tv which is actually happening this very second. Digital will be the new dominant distribution channel. Coinstar is trying to find a partner to distribute movies digitally but in my opinion the competition is just too strong, they would have to enter this market over the next 18 months and have a great strategic plan to grab as many customers from netflix as they can. Netflix has a huge presence in this space and it could be almost impossible for coinstar to take any marketshare away from netflix anytime soon. As for the numbers, out of $342 million in second quarter revenue, 79% came from these 26,900 dvd kiosk locations. Anyone who thinks this growth can continue is a fool, as quick as this revenue is pouring in it will soon slow and with over 3/4 of revenue coming from these 25k+ locations it can happen within the next 18 months as competition starts to pour into this trendy niche which is actually at the height of this fad. Blockbuster has joined the game and of course knowing that they just entered into this niche you know the fad has initially peaked. The other thing that coinstar and other companies involved in these dvd kiosks have to worry about is when cable companies finally decide to bring down their extremely high priced rip off video on demand prices which are still at $4-5 to a low price of $1. That alone could really hurt the likes of coinstar and blockbuster but I do not see this happening anytime soon as they would have probably done it by now.

As for their other service they were in first and still have a nice market share is coin counting but that even will fade away as other banks start to introduce their own machines, one for example tdbank, which offers all the coin counting for FREE!!!!!!!!!!!!!!

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Very nice call

 

At the time of the call 9/3/2010 CSTR price was $44.37. Even with today's 25% drop it is still $43.45 so I guess we need to wait and see if it is "very nice call" or not.

 

You are right, this stock ran up greatly since I did call it to drop hard, the reason for the rise in the stock price over the last few months is all about the overall market being higher. This stock ran up huge after earnings last quarter but I believe that to be just a trend, this stock in the next 18-24 months will be probably half of what its trading at now. How anyone thinks DVD kiosks are here to stay is beyond me, if anything they will be pulling them out of big box stores in years to come, if not sooner due to the demand of digital content and quick easy access to tens of thousands of movies right on your set top box. This would have been a great idea when the first DVD came about but this is just another trend that will go away soon.

 

I think NFLX is a sell too with all the mailings I am getting, it looks like AOL. But I am LONG, because they haven't bought over Time Warner yet...

 

Read this and comprehend it, this is why CSTR will be headed towards the single digits in the next 1-2 years....CSTR doesnt seem to have any new revenue streams but Redbox which wont be around for much longer!


Redbox accounted for about 80% of Coinstar’s total revenues in the first nine months of 2010, compared to about 74% of revenue in the same period the previous year.