We are all aware of some of blatant negatives of Outerwall’s business. Red Box is a disaster and massive write downs are coming. Physical money also has apparently little place in our intermediate to long term future.
Shares have seen as much as a 70% drop in share price since it’s summer 2015 peak. Is most of that bad news priced in by now?
Here are a few things that make Outerwall attractive:
- The market cap is only half a billion dollars. So it’s well within takeover range. The coolest feature here is time. The stock only has 17 million shares and half of the float is short. Over time, if the stock continues to fall A) shorts get greedier B) management is more frustrated and looking to give up C) their assets get more attractive.
- The new ecoATM is right in their wheelhouse. I have old cell phones, tablets etc laying around the house. Maybe that business can be a positive surprise nobody is talking? That said, the stock has been hit so hard, you’re basically getting a free call option on the idea that anything that can go right there.
- Their footprint in most super markets is valuable as hell to somebody. But who? That’s a great question. If you can come up with a great answer, maybe this is a good idea for you.
- This isn’t a ‘hey this is a groundbreaking idea’ takeout candidate. It’s not sexy, so dumb money isn’t flying into the shares making the holding process much more difficult.
- This next and final thing is not a good or even decent sole reason to invest. It’s actually an awful reason, but maybe it’s an enticing kicker for a company with a 10+ year timeframe.
- The end of the penny is coming. Who knows when, but it is coming. Where are we going to take all of our pennies? Are we all going to the bank? Unlikely, especially given Coinstar has monetized the process. Why wouldn’t the government just work with the company that has created the infrastructure and system to pull that off while making some money off of it. They’d be crazy not to.
Thanks for reading. What do you think?
Disclaimer: This post is for informational purposes only and is not intended to be investment advice. At the time of publishing, the author has no position in any securities mentioned.