Jan. 21, 2013
The stability of Redbox parent company Coinstar is in jeopardy, a recent New York Post article said.
Coinstar's CEO Paul Davis abruptly announced his departure earlier this month, along with the Starbucks veteran hired to lead the Rubi coffee kiosk effort, Ken Redding, also leaving the company. The executive shake-ups and a decline in stock prices have left investors concerned, the article reported.
The Post also reported that Coinstar rejected a takeover offer from Providence Equity Partners last summer, citing sources close to the situation. Davis persuaded the board to reject the proposal, arguing the company was worth more in light of its growth initiatives.
Davis' optimisim contradicts a recent Gabelli's report that projected Coinstar's EBITDA, or earnings before taxes, interest, depreciation and amortization, would fall five percent over the next four years, from $510 million, to $485 million in 2016, making the share price "extremely inexpensive."
We "believe the low valuation is driven by a fundamental underestimation of Redbox's longevity," the Gabelli report said.
Read more about DVD kiosks.