Stock Market Watch

Coinstar Plunges on DVD Price Hike (CSTR)

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Coinstar Inc. (NASDAQ: CSTR) shares plunged in trading today after investors reacted negatively to a price increase for the company’s Redbox DVD-rental kiosks. The company’s shares also fell on weaker than expected earnings forecast. However, there were some positives amid the gloom as the company reported better than expected third-quarter financial results.

Coinstar shares ended the day 7.04% lower at $49.22 on above average volume of 5.25 million. The stock fell to a low of $47.50 today.


Coinstar today said that it would raise the price of renting a DVD at Redbox kiosk to $1.20 per day, a 20% increase. The price hike will be effective from October 31, 2011. The company, however, did not raise the price for Blu-Ray DVD rentals, which will continue to cost between $1.50 and $2 per day.

Paul Davis, CEO of Coinstar, said that the price hike was necessary due to higher operating expenses. Davis noted that this is the first time in eight years that the company has raised prices.

Coinstar also provided weaker than expected earnings forecast for the fourth quarter. The Bellevue, Washington-based company expects fourth-quarter profit to come in between $0.57 per share and $0.67 per share, compared with Street estimates of $0.78 per share. However, the company’s revenue forecast for the fourth quarter came in-line with Street estimates. The company expects fourth-quarter revenue to come in between $485 million and $510 million, compared with analysts’ estimate of $483.3 million.

The DVD price hike and weaker than expected earnings outlook took some shine away from Coinstar’s strong third-quarter financial results. For the quarter ended September 30, 2011, Coinstar reported earnings of $37.1 million, or $1.18 per share, beating analysts’ estimate of $0.88 per share. The company’s sales for the third quarter were $465.6 million, once again beating analysts’ estimate of $462.6 million.

 

edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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