Automated Retail Solutions Provider – Coinstar
picks up major coverage

Automated retail solutions provider Coinstar (CSTR) -- with a market capitalization of almost $2 billion -- is in the same growth sector as AVT (AVTC.PK). AVTC.PK also provides automated retail solutions and has doubled sales for each of the last three years.

In December the stock brokerage firm of Morgan Keegan initiated coverage of Coinstar. And stock brokers/investment bankers Piper Jaffrey issued an overweight rating with a $74 price target on shares of Coinstar.

In a note sent to investors, Piper Jaffray writes, "The Redbox DVD kiosk business will account for ~85% of CY11 revenue. Approximately 30% of industry movie rental revenue was from retail stores in 2010, but we expect this will fall quickly over the next few years, with the kiosk, internet delivery and DVD-by-mail business models being primary beneficiaries. Given Coinstar's ability to secure content distribution deals with all major studios and the lower cost of content through 28 day delay deals, we believe margins have the potential to trend higher. While there is concern regarding internet delivery negatively impacting the Redbox business model, we believe any near-term (next 12 months) impact will be minimal. Additionally, while we do not expect a material revenue contribution in CY11, Redbox will be launching an internet movie offering sometime during the year. We are modeling for Coinstar revenue and EPS growth of 28% and 54% in CY11."

In an investor note Small Cap Network offered this opinion: "The trailing results aren't awful; the company is profitable, and has grown its bottom line. It's just not done so well enough to justify the current P/E of 42.4. Simultaneously, that projected 2011 EPS growth of 52% seems a little far-fetched."