RedBox Stock Spikes Amid Retail Trader Interest
Shares of RedBox Entertainment have skyrocketed 120 percent in the past five days and analysts are calling on the formerly struggling company to seize the momentum.
The stock surge comes after the DVD-kiosk rental company announced in April that it had secured an additional $50 million in financing, which could help support the company as it looks to move past its recent weak performance. The company had been negatively impacted by a lack of theatrical releases in the previous quarter and recently announced layoffs designed to help cut down its operating expenses.
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On April 25, RedBox announced that its chief financial officer, Kavita Suthar, would be stepping down in May. Suthar has been with the company since 2015, and helped take RedBox public in 2021 through its merger with a special purpose acquisition company.
And yet shares closed up 13 percent Wednesday, as the stock continues to be a new favorite among retail investors.
Favorable terms around the financing, as well as the strong upcoming film slate this spring and summer help bolster confidence in the stock, said B. Riley Analyst Eric Wold. The company also stands to benefit from reports of over-saturation in the streaming world.
“Although the launches of multiple streaming services in recent years have provided additional content viewing options for consumers, we remain confident in a demand rebound from the Redbox target demographic. We find it hard to believe that consumers that previously coveted physical rentals for <$2.00 per night would now be willing to either pay for movie theater tickets or subscribe to multiple studio streaming platforms to maintain access to the same movies,” Wold wrote in a May 3 note.
Wold further lays out a case for RedBox to behave like AMC and to raise money by selling additional equity. This could help reduce the company’s debt, as well as provide funds for RedBox to further diversify.
“More importantly, we believe the significant stock price move in recent weeks—which, we acknowledge, has more than likely been aided by the growing appeal to retail investors—also opens the door for RDBX to re-accelerate digital growth strategies that have been put on hold or delayed as management sought out additional liquidity options,” Wold said.
