I have thought Coinstar (CSTR) has been a good value stock since it sold off to $50 a share earlier in the year. The stock is up some 12% since then to $56 a share but CSTR still looks like it has upside. An analyst came out the other day with a price target of $100 a share on the shares, up from $80 a share previously. This would constitute ~80% upside from the current price. I am not as positive on the shares as this analyst from B Riley but CSTR is still cheap and is picking up some positive catalysts recently.
Other recent positive news/catalysts for CSTR:
- The company's CEO recently stated Coinstar will see better results in the second half of the year as it benefits from a strong slate of summer movies.
- Its current Hobbit promotion should help its subscription growth.
- The company is one of the most heavily shorted stocks in the market with ~40% of the total shares sold short. It easily could benefit from the same sort of short squeezes that have pushed Tesla (TSLA) and Netflix (NFLX) up much higher recently.
6 additional reasons CSTR looks good at $56 a share:
- Analysts expect revenues to grow at a ~7% CAGR over the next two fiscal years and the stock sports a five-year projected PEG of under 1 (.62)
- The company has raised operating cash flow by more than 40% over the last couple of years and the stock is selling for less than 4x current operating cash flow.
- CSTR is selling at the bottom of its five-year valuation range based on P/E, P/S and P/CF.
- Bears have been worried about the company's business model for years. Despite this, the company has raised earnings/revenues at better than a 25% CAGR over the last five years.
- Continuing that theme, the company has easily beat earnings estimates for six straight quarters. The average beat over consensus over the last four quarters has been ~13%.
- The stock sells for ~10x 2014's projected 2014 earnings. Its average forward P/E over the last five years is much higher (20.7).
Note: I am playing a rise in Coinstar by holding just out of the money bull call spreads.