Coinstar Shares Almost Lose One-Third in Value

Coinstar Inc. (NASDAQ:CSTR) shares were hammered today, falling 27% or $15 to close the day at $41.50.  The Street was not impressed with the company's guidance and the RedBox King paid the price.

Mastery Sponsors - Become one Today

Despite Coinstar's (CSTR) revenue for Q4 pegged at a 31% increase to $391 million, the Street killed the stock as they expected Q4 to fall between $415 million to $440 million. Coinstar said it had expected stronger performance from new releases and higher-priced Blu-ray rentals from its Redbox rental kiosks.  The company believes revenue for 2011 should range between $1.7 billion to $1.85 billion, well shy of the $1.87 billion analysts expectated.

However, thanks to Barron's they point out that the bulls seem still pretty bullish:

(http://blogs.barrons.com) Wedbush Securities analyst David Pachter this morning reiterated an Outperform rating on the stock, while lowering his price target to $62 from $67. Pachter thinks the miss was a result of “overly aggressive guidance” rather than a problem with the business. The company ratcheted up expectations after a strong Q3, and the new 2011 outlook is about where things were back before Q3’s results and the guidance. Nevertheless, he cut his forecast for this year to $1.85 billion, the top end of the new revenue range the company offered, and cut his EPS estimate to $3.10 from $3.34, which is toward the lower end of the company’s forecast of $3.00 to $3.50.

Ronald Bookbinder with The Benchmark Co. reiterated a Buy recommendation but chops his price target to $70 from $80. He’s still impressed with Coinstar’s growth, he notes, even the 14.5% same-store growth in Q4, though it was below the 21% he had been projecting. The stock is deeply discounted versus peers, he writes, even though the company shows “growth and leverage.” His price target represents 24 times his new 2011 estimate for $2.90 per share.

Michael Olson with Piper Jaffray reiterates an Overweight rating, while cutting his price target to $56. “The real question is whether the DVD kiosk story is over, and our take is that kiosks will continue to gain share over the next couple of years,” writes Olson. The miss in the quarter was a “function of inventory management,” not a failure for the kiosk business model, he believes. Forecasting the Redbox business “will continue to be challenging” for several quarters. But the new forecast from the company has “a layer of conservatism,” he believes. Olson’s new estimate for this year is $1.78 billion in revenue and $2.89 in EPS.

Best to wait out the drama and let the bears dig into Coinstar, at this rate, shares could get even cheaper.  If you are waiting to buy on the dip, keep waiting, patience is key.

SOURCE: http://blogs.barrons.com/techtraderdaily/2011/01/14/coinstar-estimates-targets-down-but-still-bullish/