Coinstar Takes on Netflix
If you are an investor in Netflix (NASDAQ: NFLX), the one fear you have above most others is that other companies – from Apple (NASDAQ: AAPL) to Google (NASDAQ: GOOG) to Amazon.com (NASDAQ: AMZN) – will put a bullseye on your online streaming marketshare.
Now you can add Coinstar (NASDAQ: CSTR), deployers of the ubiquitious Redbox DVD vending kiosks, to the list with its newly announced partnership with Verizon Communications (NYSE: VZ) to begin streaming media online.
Whether or not this is a gamechanger for Netflix remains to be seen. As Monday’s close, shares of both Netflix and Coinstar were moving strongly higher, with NFLX up more than 2% and CSTR gaining more than 1% (even Verizon, which has sold off sharply since the beginning of the year, edged higher by three-quarters of a percent), the consensus opinion on the deal is somewhere between “this won’t hurt Netflix” to “this won’t hurt Netflix, yet.”
Technically speaking, Netflix continues to trade in overbought territory below the 200-day moving average. The stock has closed higher for four days in a row – seven out of the past eight – earning NFLX our lowest “consider avoiding” rating of 1 out of 10 late in trading on Monday. Netflix also has a negative, short-term edge of just over 1%.
For its part, Coinstar lost much of its early momentum on Monday. The stock opened up by well over 6%, but reversed over the course of the trading day to close well off the session’s highest levels. Finishing lower for three out of the four days leading into Monday’s volatile session, CSTR is set to open Tuesday morning in neutral territory, with a small bias toward the overbought. With a modest positive edge of half a percent, Coinstar has earned neutral, 6 out of 10 ratings ahead of trading on Tuesday.
Note: shares of CSTR are up sharply in the afterhours on Monday, after reporting quarterly earnings that were better than analysts had expected. CSTR rallied by more than 14% immediately after the announcement.
Shares of Verizon Communications have been stronger in recent days, closing higher for five out of the past six sessions, and edging toward both new, short-term highs and overbought territory above the 200-day moving average. Two rounds of selling at the beginning and end of January have kept the stock under significant selling pressure in 2012, with VZ down more than 5% for the year.
Heading into trading on Tuesday, Verizon is in neutral territory with a bias toward the overbought.
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David Penn is Editor in Chief of TradingMarkets.com