Tuesday, August 7, 2012

Coinstar: Don’t Sweat Debit Fees, Says Piper; Q4 Slate Looks Good

Piper Jaffray’s Michael Olson today reiterates an Overweight rating on shares of Coinstar (CSTR), writing that worries about debit-card fees, and about what movies will be available for its “Redbox” rental kiosks, are overblown.

Coinstar has been under pressure since its October 27th Q3 earnings report, when the company said it would raise prices by 20 cents per day, to $1.20, to accommodate increased costs as a result of the Durbin Amendment that increased debit card interchange fees. The shares are down over 20% since that date, though they are up 66 cents, or 1.6%, at $42.45 today.

Olson urges investors to look past the debit card issue: “While the company is currently in negotiations with processors regarding debit card fees, Q4 guidance assumes Redbox will pay the maximum fee on transactions,” he writes. “Simply put, we expect this to be temporary and believe that Redbox will successfully negotiate fees lower than the maximum rate by some point next year.”

As for the slate of DVD titles this quarter, the company said in October that 40 box-office movies with a gross equal to or higher than $5 million are coming to theaters, for a total of $3.72 billion. Of those, 17 will have a 28-day delay for Redbox kiosks this quarter, of which, half are expected to hit the kiosks this month.

Taking all that into account, Olson remarks,

Our analysis of the Q4 DVD schedule suggests Q4’11 is +10% y/y for box office revenue of titles going to Redbox. We generally expect box office totals to be about flat y/y in any given quarter, so we see this as a positive data point. Additionally, the data suggests that there are more delayed titles in Q4’11 (12) vs. 9 in Q4’10 and 9 last quarter, a positive for GM in Q4’11 (see details on pg 2).

No comments:

Post a Comment