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Outerwall shares take a beating, but analysts remain optimistic

October 14, 2013

Although Outerwall investors have been dumping shares since the company cut its earnings and revenue forecasts for the fiscal year, analysts on Seeking Alpha say the company is in the pink — even while Redbox battles obsolescence with the rise of video streaming.

The following is an excerpt from a write-up by Syncopy Research on Seeking Alpha:

It's abundantly clear that Outerwall is in the pink of health. In fact, in the two years that Netflix has been streaming video, Outerwall has managed to grow its revenues by about 30 percent and its net income by a very healthy 53 percent. It is instructive to note that Redbox has managed to grow its numbers in a backdrop of intense competition from the likes of Netflix, which manages to add roughly 600,000 subscribers each quarter.

Redbox's experience proves that consumers still want to watch DVDs even as they watch streaming video. Redbox estimates that a good 20-30 percent of its customers are already subscribed to competing streaming services. Apparently, consumers love the immediate gratification of renting DVDs from their local Wal-Mart or Walgreens store instead of having to wait two days to receive a Netflix delivery. Outerwall plans to add another 1,500 Redbox stores to its existing 43,700 this year.

Read more about DVD kiosks.