Coinstar stock jumps nearly 25% amid new details about Redbox digital strategy

Shares of Coinstar stock jumped nearly 25 percent Friday after the Bellevue-based company gave a better-than-expected outlook for 2011 and announced plans to introduce a digital video service next year.

Coinstar, whose Redbox machines dispense DVDs for a dollar a day at supermarkets and Wal-Mart Stores, projected a 2011 per-share profit of between $3 and $3.50, beating Wall's Street's projection for $2.84, according to Thomson Reuters.

Coinstar's announcement Thursday that it is talking with potential partners on a new online video service also seemed to please investors.

The company said it's looking for a partner with a strong brand, large customer base, technology platform and its own digital content, suggesting Coinstar won't invest heavily on digital rights for movies and TV shows streamed online.

"We expect a partnership would allow Redbox to quickly and efficiently access content and technology," D.A. Davidson analyst John Kraft wrote in a research note. "Fortunately, Redbox's large customer base and broad retail footprint are strategically sought-after, in our view, giving it plenty of negotiating power. Expect the launch during 2011 in plenty of time to catch the streaming wave."

Coinstar shares closed up $11.32, or 24.5 percent, to $57.58 Friday.

A day earlier, the company posted a third-quarter profit of $19.5 million, or 60 cents a share, down from $41.4 million, or $1.34, a year ago, when it recorded a one-time gain. Even with a 6-cent loss from discontinued operations, its per-share profit of 60 cents was still more than the 50 cents that analysts expected.

Coinstar's third-quarter Redbox revenue rose 54 percent from a year ago to $305.5 million, while total revenue increased 42 percent to $380.2 million, including $74.7 million from its namesake coin-counting machines.

Redbox, which has 28,500 self-service machines in shopping centers throughout the U.S., recently began rolling out Blu-ray Disc rentals for $1.50 a day and expects them to represent between 5 percent and 10 percent of discs by the end of 2010. It also has begun testing video-game rentals for $2 a day, and they're now available at 4,500 machines.

Additionally, an upcoming trial in the United Kingdom suggests Coinstar has international aspirations, Kraft said.

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com