Coinstar shares fall on DVD release schedule, JV concerns
Coinstar shares fall on DVD release schedule, JV concerns (Global Markets) - Shares of Coinstar Inc (CSTR.O) fell 5 percent after a note from Dougherty & Company LLC raised concerns about the Redbox owner's performance in the third quarter and its joint venture with Verizon Communications Inc (VZ.N).Stock Market Predictions
The third quarter has fewer DVD movie releases than last year, analyst Steve Frankel wrote in a note.
DVD releases of such blockbusters as Disney's (DIS.N) "The Avengers" would fall outside the company's third quarter, the analyst said.
He also raised doubts about Coinstar's joint venture with Verizon offering a "competitive" video streaming product without investing significantly beyond the initial commitment of $450 million.
Coinstar's Redbox unit and Verizon formed a joint venture in February to sell video services aimed at competing against video rental giant Netflix Inc (NFLX.O).
Wall Street thinks Verizon/Redbox's success in competing with Netflix and other online rivals like Amazon.com (AMZN.O) and Hulu Plus, will depend hugely on the price of the service and the depth of content.
While Netflix charges $7.99 a month for unlimited streaming of movies, the Redbox and Verizon offering's price will start from around $6 a month for movie streaming and one DVD rental at a time from the Redbox kiosks, Global Markets reported in February.
Frankel said Verizon-Redbox's $450 million commitment compares with Netflix's budget of more than $1.5 billion on content and $580 million on marketing this year.
The venture, 65 percent owned by Verizon and 35 percent by Redbox, plans to launch its service in the second half of 2012.
Frankel maintained his "neutral" rating on the stock saying the JV has a potential for substantial losses.
Coinstar is scheduled to report second-quarter results on July 26, when Frankel expects the company to offer a conservative outlook.
Shares of the company were down 4 percent at $64.10 on the Nasdaq on Friday.
(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Don Sebastian)