Tomahawk, WI 9/18/2013 (BasicsMedia) – Outerwall Inc (NASDAQ:OUTR) remains one of the largest providers of automated solutions for retail purposes, which are designed to make it easier to offer convenient products and services. It used to be known as Coinstar Inc before it went through the name-change. The company heavily relies on Redbox rentals to stay afloat. However, this appears to be affecting its financials since the rentals have been way below what the company had anticipated. These negative developments haven’t stopped OUTR being listed as one of the stocks to watch. Why?

Drop in Redbox Rentals Affects OUTR Financials

The fact that the company announced a major drop in Redbox rentals has contributed to the much lower expectations which the company’s top executives have for OUTR. As a result of this, both the company’s Q3 of 2013 financials and FY2013 results will not be as had been reported earlier. I feel that the company had placed a lot of faith on the fact that Redbox rentals would pick up in each quarter of 2013, which would lead to better performance in this financial year. Unfortunately, this hasn’t happened the way the company had expected leading to disaster.

The figures which OUTR released were better than last year’s. However, while there were many rentals made in this latest quarter, they were done for much fewer nights compared to last year. This was partly as a result of the higher discounts offered by the company with the intention of attracting more sales and better revenue. Each customer brought in much less revenue to OUTR than what had been hoped for. The financial results which the company will be announcing on Oct 14, 2013 for its third quarter will not be better than what we have seen thus far in 2013.

OUTR Readjusts its Earnings Expectations

Earlier in 2013, OUTR had stated that it expected to raise $604 million to $630 million as revenue in this financial year. Based on what has transpired with its Redbox rentals this year, it has now revised its expectations for 2013 down to between $569 million and $589 million. Since OUTR’s acquisition of Redbox movie kiosks in 2008, this has become its primary source of revenues. However, the effectiveness and ability of Redbox to bring in more revenue will be seriously hampered now that most movies will be released much later during Q4 of 2013.

The movie industry is one which OUTR relies on heavily in order to boost its Redbox rentals. If negative news continues emerging from this industry, OUTR will not stop suffering the most. This is what is expected of the stock now that some of the movies whose DVDs OUTR expected to distribute as rentals are now slated for release in the latter part of 2013, or earlier in 2014. This is not the sort of news which the company can do with at this time. The market has also not been kind to OUTR, and I’m yet to see anything showing me that the trend is likely to change soon.

I still see bleak times in the short term for OUTR. There might be a need for the company to diversify and stop overreliance on only one product to raise the revenue it expects. Probably, that is when the company’s outlook will shift permanently from negative to positive.

DISCLAIMER: This content is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a real licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.