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DVD Rental Kiosk Stocks

Written By Brian Hicks

Posted May 24, 2010

Screw Blockbuster.

Long lines, slow customer service, late rental fees…

Hundreds of locations were closed last year, making it harder to find a drop slot at which to return a rental.

Blockbuster stores ramped up their competition in the DVD rental space with their “no more late fees” policy, but only to go back to charging late fees — just to try to stay in business.

As a movie renter, I was sick of it. And I’m not the only one who felt this way…

Hundreds of thousands of consumers shared my sentiment. And they too began turning to Netflix and Redbox as their main video rental source.

Netflix allows the renter to go online, click through a few menus, and wait by the mailbox. Watch it. Seal it back up. Send it back. Wait for the next film or disc of episodes from a television series to arrive at your home from your “Queue,” which you set at your leisure…

Those wanting a completely no-hassle video rental experience also have the option of taking a trip to the nearest Coinstar Redbox kiosk… Swipe your card, press a few buttons, take a video for as long as you want — you’re paying just $1 a day for a rental — and return it to any Redbox location.

What could be more simple — or convenient?

Netflix and Redbox never charge late fees, and they deliver the movie right to your mailbox — or allow you to pick up a DVD at your grocery store and return it to the 7-Eleven down the street.

These latest modes of DVD rental are the reason Blockbuster has plans to close 960 stores through this year as they struggle to stay afloat.

Netflix is currently trading above $90; Coinstar is nearing $60.

These are gains realized by investors and companies that pay attention to changing consumer habits.

It’s the easiest way to make money in this market

If you want to make money in this market, take a look at what consumers are doing… what they’re buying… and why they’re buying it.

These are the ultimate indicators.

Observing these trends is exactly how we made 82% on Coinstar calls in about two weeks — and how 37 of my Options Trading Coach readers just cashed out with 1,650% max gains on the same trade.

And all we did was pick up on small changes in consumer DVD shopping trends…

We knew consumers wanted more DVD-rental convenience and cheaper prices… and that the brick and mortar companies (Blockbuster and Movie Gallery) just couldn’t keep up.

So we caught the new consumer DVD trend, picked up Coinstar, and watched it explode from $35 to more than $50 in a few short weeks.

We caught the buying opportunity of a lifetime.

And we’re about to catch it again — for a potential 1,650%

Until recently, the DVD-kiosk business has been ruled by Coinstar’s Redbox, which collected more than $774 million in sales last year alone, in a market valued at $950 million.

They just raised their 2010 outlook and posted a profit that easily beat expectations…

The company is projecting a 2010 profit of $1.82 to $1.94 a share, bettering a February 2010 forecast of $1.50 to $1.60 a share. And that’s after the company earned $6.4 million, or 21 cents a share (exceeding 13-cent estimates), as revenue just about doubled to $350 million from $239 million.

Better yet, the company says more than 150 million people every week are within 10 feet of a Redbox stacked with 700 discs.

No membership is required; videos can be returned to any location; and renters can hold onto the discs for as long as they want.

Plus, Redbox only pays about $18 for a disc and rents it about 15 times at an average cost of $2 a pop.

It isn’t hard to see how difficult it is to compete with this system — and why a crippled Blockbuster isn’t happy. But what do they expect? Any consumer would rather shell out a dollar with no strings attched, than $4.50 or more for a two-night rental…

Coinstar remains a buy.

So does this kiosk company… 

The nation’s biggest ATM maker wants to compete

NCR, the company that makes automatic teller machines and kiosks is ready to do some transacting for themselves.

They’ve already rolled out DVD-kiosks across the United States to prove they’re serious… desiring a piece of an industry expected to grow 37% this year to $1.3 billion.

But don’t run out and risk the house on these guys just yet. You will want to play it safe.

We’re still slightly concerned that they don’t have any agreements with studios… yet. But that shouldn’t be a long-term issue, as they plan to offer something that Coinstar does not: sales.

NCR wants to “use the kiosks to sell DVDs, giving the studios a chance to recoup lost DVD sales revenue and possibly encourage impulse DVD purchases,” according to CNN.

And that alone could prove to be a gold mine.

Here’s how to profit

Sure, you can buy the underlying NCR stock up to $14… but if you want to see the big gains, you must use options.

I don’t care what “experts” or CNBC would have you believe about “scary options trading.” Options trading is quickly becoming the preferred way to make serious gains while limiting risk.

Take Coinstar stock as an example…

When we first mentioned Coinstar to readers, the stock traded at $35. It’s now at $55 — a fine gain, if you’re comfortable with scant gains of 57%.

But we want the explosive gains — the 1,650% gains that 37 of my readers can retire with. And to do so, we must employ options.

Truth be told, you have just as great a shot at grabbing the options profits that are sitting on the table as any other investor out there today.

Yes, there’s risk in any investment you make; but without risk, there’s no gain.

Even Warren Buffett, the world’s most successful investor, understands that. He often uses options to reduce risk in stocks and profit from stock fluctuations at a reduced cost. He knows the power options can have when you make a sound decision based on sound analysis.

Options proved to be the only way to make 1,650% on a stock like Coinstar… and options trading is the only way you’ll be able to do it with NCR shares.

In my latest report, I reveal an option to follow up a starter play that landed readers 89% gains in just nine days. You can read the report in full right here.

Stay Ahead of the Curve,

Ian L. Cooper
Wealth Daily