Redbox Entertainment Inc. (RDBX - Get Rating) operates a network of self-service kiosks in the United States. The stock has gained 118% over the past month and 310% over the past three months, driven by newfound interest from retail investors and its recently announced $50 million in additional financing arrangements. It recently acquired North American distribution rights to WWII action-drama Come Out Fighting.

In addition, Chicken Soup for the Soul Entertainment (CSSE) will acquire RDBX to form the streaming industry’s premier independent AVOD platforms.

It is currently trading 76% below its all-time high of $27.22, which it hit on October 26, 2021, due to the Reddit-fueled short squeeze. Moreover, stiff competition, delayed digital growth strategies, and increasing inflation could prove to be significant headwinds for the company in the near term.

Here’s what could influence RDBX’s performance in the upcoming months:

Disappointing Financials

For the fiscal quarter ended March 31, 2022, RDBX’s net revenue declined 17.6% year-over-year to $63.23 million. The company’s operating loss grew 64.9% year-over-year to $48.19 million, while its net loss came in at $40.87 million, representing a 50.3% year-over-year increase. Also, its total assets came in at $361.51 million for the period ended March 31, 2022, compared to $378.03 million for the period ended December 31, 2021.

Unfavorable Analyst Estimates

Analysts expect RDBX’s EPS to decrease 200% for the quarter ending September 30, 2022, and 163.8% in fiscal 2022. Also, its EPS is expected to remain negative in the current quarter, next quarter, current year, and next year.

POWR Ratings Reflect Bleak Prospects

RDBX has an overall rating of D, which equates to a Sell in our POWR Rating system. The POWR Ratings are calculated by accounting for 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. RDBX has an F grade for Sentiment. This is justified as analysts expect its EPS to decline in the near term.

RDBX is ranked #5 out of 8 stocks in the F-rated Entertainment – Movies/Studios industry. Click here to access all of RDBX’s ratings.

Bottom Line

RDBX could decline in the near term due to concerns over fewer theatrical releases, rising competitive pressures, and high inflation. Moreover, considering bleak analysts’ expectations, I think the stock could be best avoided now.

RDBX shares were trading at $6.48 per share on Tuesday afternoon, down $1.23 (-15.95%). Year-to-date, RDBX has declined -12.55%, versus a -12.29% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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