Coinstar Shares Popped: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Redbox video rental parent Coinstar (NAS: CSTR) climbed as high as 10% on Monday after JPMorgan analyst Paul Coster upgraded the stock from neutral to overweight.
So what: Along with the upgrade, Coster reiterated his price target of $50 per share, representing a nice 26% premium to Friday's close. However, he also made sure that investors view the call as a "6-month long trade," as opposed to a long-term, buy-and-hold recommendation.
Now what: "We believe the DVD kiosk rental opportunity will be saturated by late 2012," Coster wrote in a note to clients. "Furthermore, we believe the DVD (and broader optical disk) category has already entered a long-term decline (analogous with peak-to-trough decline of VHS and CD categories). ..." So while pouncing on a November pullback might be tempting, increasing pressure from digital gorillas like Amazon (NAS: AMZN) and Netflix (NAS: NFLX) make it an easy pass for conservative investors. As Warren Buffett says, "If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes."
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Coinstar, Amazon, and Netflix. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.