Wedbush Says Outerwall Has Strong Core; Reiterates Outperform

In a report published Monday, analysts at Wedbush reiterated their Outperform rating on

and price target of $82. The preliminary results for Q1 suggest strength in the company's core business. The company is expected to report its revenue and EPS for the quarter significantly ahead of the consensus. According to the analysts, the Q1 outperformance was driven by price hikes in Redbox in December 2014. Wedbush expects its estimate to prove to be too low, given Outerwall's DVD rental price hikes of 25-30 percent in December. Redbox is expected to post its comps in the high single digits. With the DVD box office segment witnessing improvements through 2015. The analysts maintained their FY15 estimates, saying that they included the closure of the company's "unprofitable Canadian Redbox business and aggressive investment in its rapidly growing ecoATM business." "We do not expect the core business to decline, and believe that the EBITDA guidance range reflects increased investment in growing existing businesses," the analysts added. Outerwall is a value stock, since the analysts believe that returning free cash flow to investors remains a priority for the company, while the company share count is likely to decrease significantly, while earnings and cash flow concomitantly grow.