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Is Redbox Stock a Compelling Long-Term Pick?

Redbox (NASDAQ:RDBX) stock began trading on the exchange at the end of October 2021. However, shares of this entertainment company witnessed a sharp sell-off and have lost over 37% of their value over the past month. 

Part of the problem has been the weakness in its legacy DVD rental business. It’s worth noting that Redbox has witnessed a secular decline in the physical rental market. 

Nevertheless, Redbox is undergoing a shift and is evolving as a multi-faceted and scalable digital entertainment company. 

So is Redbox a compelling long-term stock?

Analyst Weighs In

Alicia Reese of Wedbush initiated coverage on Redbox stock with a Buy rating and listed three growth catalysts that make it a compelling long-term pick. 

Highlighting Redbox’s 39 million loyalty members, Reese stated that the company could leverage its large member base to market its digital products. The analyst added that Redbox has about 40 million existing DVD kiosk customers, and it needs to convert only a small fraction (about 10-15%) of these customers to digital to reach a “$1 billion+ annual revenue run-rate with upside.” 

Reese added that the company will gain from the “ongoing share shift from linear broadcast to AVOD (advertising-based video on demand), and from the fact that social media and conventional channels are saturated and losing share.”

Wall Street’s Take 

Besides Reese, the rest of the analysts on TipRanks are also optimistic about Redbox stock. RDBX stock has received a Strong Buy consensus based on 4 unanimous Buy ratings. 

Further, Redbox’s stock forecast on TipRanks shows that it has significant upside potential from current price levels. To be precise, the average Redbox price target of $24 indicates 269.8% upside potential to current levels.

While analysts remain bullish, investors and hedge funds are accumulating RDBX stock on the pullback. TipRanks’ Stock Investors tool shows that investors have a positive outlook on Redbox stock. Per the tool, 1.3% of the investors holding portfolios on TipRanks have increased their stake in Redbox stock in the last 30 days. 

Meanwhile, TipRanks’ Hedge Fund Trading Activity tool shows hedge funds have added 150.4K Redbox shares to their holdings over the past three months.

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