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Larry Meyers, PDL Capital (44 clicks)
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I thought Coinstar (CSTR) might just be a one-hit wonder. Once the company got its coin-counting machines into all the places it could, its revenue would flatline and that would be the end of the growth story.

But then it came up with Redbox. Great concept. Rent a DVD at a kiosk placed in grocery stores, pharmacies, fast food restaurants, and convenience stores, and do it for a buck. This price point gave nightmares to competitors like Netflix (NFLX), which was pushing its 3-movie plan at $18 a month, and poor Blockbuster (OTC:BLOAQ). The other big advantage was convenience -- return the DVD to the store the next day. Generally, there were no lines, no long checkout process. Simple, fast, easy.

Yes, streaming video is going to eventually kill Redbox. But that's alright, because Redbox is just one concept in what I think will be an infinite number of Coinstar kiosks. Does anyone else recall the bathroom vending machines of the old days -- the ones that sold aspirin and contraceptives? Coinstar will reinvent this idea for the 21st century using anything it can think of.

Use your imagination. Better yet, use Coinstar’s. Then apply some strategy to determine the best products to place in a kiosk. Video games are a no-brainer. Can you imagine a partnership with Express Scripts (ESRX), with commonly ordered generic prescriptions becoming accessible through a swipe card and Coinstar kiosk? I can. Think about the products Johnson & Johnson (JNJ) makes, like mouthwash, Tylenol, and pain relievers. Coinstar could undercut the pricing at convenience stores and deliver those same items to customers for less.

With analyst's five year annualized earnings growth at 22%, and the stock trading at 18 times this year’s earnings, I see Coinstar not only as a present-day value play, but as one for the ages. It’s a buy.


Source: Coinstar: Anything Is Possible