Coinstar is Not Properly Executing Their Business Plan

According to analyst Michael Pachter at Wedbush Morgan, Coinstar (NASDAQ:CSTR) has a great business, but they’ve been having some issues executing their business plan.

Here’s Pachter’s bullet points for a recap of Coinstar’s earnings announcement:

  • Q4 results in line with negative preannouncement.
  • The company maintained FY:11 guidance for revenue of $1.70 — 1.85 billion, and for EPS of $2.60 — 3.10, but offered Q1 guidance well below consensus.
  • The weak Q1 guidance reflects a continuation of the execution problems in Q4 rather than structural weakness in the business.
  • Maintaining our FY:11 estimates for revenue of $1.85 billion and EPS of $3.10.
  • We think that Coinstar is a healthy company with solid earnings growth prospects, but one that remains plagued by out of control inventory purchases.
  • Coinstar is holding an Analyst Event on February 16 in San Francisco, and we expect greater visibility into its inventory management issues at that time.
  • Maintaining our OUTPERFORM rating and our $62 price target, which reflects a multiple of 20x our 2011 EPS estimate of $3.10.

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