Coinstar Guides Higher, Research In Motion Guides Lower: How to Play It

Includes: BBRY, NFLX, OUTR
by: SA Editor Rocco Pendola

It's almost better than a Game 7 in the NHL. Excitement after the bell on Thursday as Coinstar (NASDAQ:CSTR) came back from the abyss, blowing away earnings estimates and Research in Motion (RIMM) getting halted after tempering its outlook. Here's the recap on both announcements from my InPlay subscription:

In terms of my track record on the stocks, you win some and you lose some. As I noted in a previous Seeking Alpha article, "I really want to like Coinstar," but I simply cannot bring myself to do it, thanks, largely to a management team that appears unaware of its own company's condition. And even this good news rings a bit strange. The company faces class action lawsuits after it crashed back in January on news that it, to put it mildly, miscalculated earnings thanks to its RedBox snafu. Shareholders took a bath seeing CSTR plunge from a high of $57.65 on January 13th to a closing price of $41.50 on the 14th.

In after hours trading on Thursday, CSTR returned to the area it fell from back in January. This time management missed again, but in the right direction. I think I will sit this one out. If you can find a technically-based short-term play -- like a bounce up or down -- go for it, but I have little confidence that management actually has a true handle on their business, irrespective of the upward guidance.

Despite my skepticism over Netflix (NASDAQ:NFLX), they are right about one thing -- streaming trumps DVDs no matter how you deliver them. And while Coinstar apparently intends to stream and keeps us hanging about a streaming partner, they just don't appear to have their ducks in a row. While not a short, I would be cautious playing CSTR long, particularly after any significant run-up.

The Coinstar news, however, could hurt Netflix, which traded down after hours on Thursday by about one-half of one percent after ending the regular session down $1.59 at $234.37. This is just another small piece to add to Netflix's bad news pie. I maintain my long position in NFLX puts and feel even better about it after this news. Clearly, at least so far, investors do not share my concerns over Coinstar, therefore Netflix could face associated pressure.

Speaking of potentially inept management, James Balsillie's RIMM can't quantify for us how many corporations actually want PlayBooks sent to them and now he's lowering near-term numbers, thanks to Blackberry shipments on the low-end of estimates. I maintain my short case on RIMM via put options. It's actually quite simple.

As I have noted before, Apple (NASDAQ:AAPL) can tell us with certainty how many companies, by size, are paying for or piloting iPhone and iPad. This breeds confidence. Balisille breeds uncertainty. On the consumer side, it doesn't take a rocket scientist to realize that Apple, Google's (NASDAQ:GOOG) Android, and even Nokia's (NYSE:NOK) Symbian platform are seeing better or equal market traction than RIMM. Bottom line -- the Blackberry was cool on a previous day; iPhones and Android devices represent the future with Nokia/Microsoft (NASDAQ:MSFT) and now RIMM biting at Steve Jobs' and Larry Page's ankles.

If you happen to hold any of the RIMM LEAPS puts (between $57.50 and $52.50) I recommended buying, things should look good for you going forward. If you get a little antsy, it might make sense to take some profits if you have them. It never hurts, even if you end up leaving money on the table. Because I think the stock has further to fall, I would hold the portion of the position that would still allow me to sleep well at night.

Disclosure: I am short NFLX.

Additional disclosure: Author is short NFLX via a long position in NFLX put options. Author may initiate a long or short position in AAPL, RIMM, or CSTR at any time.