Coinstar, Inc. (CSTR): A Good Buy?

The company did convert a majority of NCR’s kiosks into Redbox kiosks, as well as gotten into a partnership to receive hardware, software and other services from NCR.

Since NCR’s core focus wasn’t around the DVD rental business, NCR decided to sell-off these assets. But the real strategic benefit goes to Redbox, as it reduces the competitive threats stemming from NCR’s entertainment business line, as well as growth in the number of kiosks.

Expanding the Breadth of Offerings

The company’s management is very experimental, and is keen to try out newer ventures and business lines. Coinstar, Inc. (NASDAQ:CSTR) is launching Rubi, which is single cup coffee via vending machines. This Rubi initiative is in partnership with Seattle’s Best Coffee, and will be rolled out in the form of kiosks in various grocery and merchant channels.

The major new initiative for the company comes in the form of Redbox Instant, which is the company’s joint venture with Verizon Communications Inc. (NYSE:VZ). Under the agreement, Verizon will be holding the majority stake in the company with 65% ownership, and Redbox will hold the remaining 35%.

The Redbox Instant just launched and offers subscription based on demand video streaming, along with DVD rentals from more than 42000 DVD kiosks. This makes a great partnership between these two companies as Verizon Communications Inc. (NYSE:VZ)’s cloud technologies and sizable on-demand content library along with Redbox’s brand name and physical presence might make the venture a strong force in the online video streaming space.

In addition, Coinstar, Inc. (NASDAQ:CSTR) is also testing concepts like refurbished electronics and self-service photo booths in some markets. Also, the company launched Redbox Tickets to allow customers to purchase tickets at numerous live events and attractions, and is expected to gain more consumers down the road.

Going Forward

Coinstar, Inc. (NASDAQ:CSTR) has been steadily growing its top line, as well as bottom line in the last few years. The company is approved to repurchase up to $380 million worth of shares as of Jan-2013, which should drive its EPS in this year. Wide-spread consumer adoption of its video streaming initiative, as well as newer products at its self-service kiosks will be important in driving the company’s fortunes going forward.

The article Coinstar: A Good Buy? originally appeared on Fool.com and is written by Ishfaque Faruk.

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