The analyst firm lowered its price target for the company to $76 from $100. It may be difficult for Outerwall to increase the revenue generated by Redbox according to analyst Eric Wold. The analyst noted that changes to consumer behavior will have a negative impact on the movie rental kiosks over time. Outerwall may have trouble increasing its profit margins for Redbox according to Wold.
Must read: Warren Buffett's 25 Favorite Stocks
Separately, TheStreet Ratings team rates OUTERWALL INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate OUTERWALL INC (OUTR) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- OUTR's revenue growth has slightly outpaced the industry average of 2.2%. Since the same quarter one year prior, revenues slightly increased by 4.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, OUTERWALL INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The debt-to-equity ratio is very high at 8.28 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, OUTR has a quick ratio of 0.51, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- The gross profit margin for OUTERWALL INC is currently lower than what is desirable, coming in at 29.34%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.86% trails that of the industry average.
- You can view the full analysis from the report here: OUTR Ratings Report