UPDATE: Compass Point Upgrades Coinstar to Buy on Free Cash Flow Yield
Compass Point raised its rating on Coinstar (NASDAQ: CSTR) from Neutral to Buy with a $50 price target.
Compass Point commented, "Following 3Q'12 earnings results, we are upgrading our rating from Neutral to Buy. … We acknowledge that the physical DVD disc may become technologically obsolete similar to CD and VHS technologies. Total physical DVD rental transactions were down year over year 22% in 3Q'12, 13% in 2Q'12, and 3% in 1Q'12. However, market share is rising, the company has pricing power, cash generation is substantial, and management could enhance shareholder value tremendously by sharply reducing growth capital expenditures in the Redbox business. At less than 8x enterprise value to free cash flow after interest expense the shares are among the cheapest in our coverage universe."
Coinstar closed at $43.23 on Thursday.
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Tags: Compass Point