5 Reasons to Sell Netflix, Inc. (NFLX) and Pandora Media Inc (P), and Buy Coinstar, Inc. (CSTR)

Bank of America Merrill Lynch is one of few firms on Wall Street that has a bearish view on Netflix, Inc. (NASDAQ:NFLX). The analysts believe that U.S. subscribers will peak at 35 million, and that fundamentals haven’t changed despite the large run in share price. BAML has a $95 price target and Underperform rating on the stock.

Activist investor Carl Icahn stated in a telephone interview with Bloomberg that he is not planning to take a board seat. Although Icahn has denied the sale of his Netflix shares, the stock sold off on March 4 on rumors that the billionaire was taking profits.

Reader’s Consolation in CoinStar

Unlike Pandora and Netflix, Coinstar, Inc. (NASDAQ:CSTR) has a history of actually making money. The company has earned more money in the last year than Netflix, Inc. (NASDAQ:NFLX) and Pandora’s collective history as public companies. Coinstar is a leader in the automated retail industry, with its flagship RedBox DVD rental business and Coinstar coin machines.

Investors are concerned that Coinstar, Inc. (NASDAQ:CSTR) has slowed the expansion of RedBox kiosks based on closing an assembly plant in Creedmore, North Carolina. However, management has indicated numerous times to Wall Street that the progression of RedBox retail outlets would slow.

Coinstar is also in the process of launching RedBox Instant, a joint venture with Verizon Communications Inc. (NYSE:VZ). This service will directly compete with Netflix and Coinstar, and is able to leverage the power of Verizon’s wide customer reach and network access. I believe the RedBox Instant service is an underappreciated growth opportunity for Coinstar.

Revenue at Coinstar, Inc. (NASDAQ:CSTR) has grown 19.3% in the last 12 months, and the stock trades at an attractive 11.5x price-to-earnings.

Foolish Bottom Line

In conclusion, I recommend that readers take profits in Netflix and Pandora Media for the reasons outlined above. If you have an interest in emerging media, Coinstar offers the best investment in my opinion. The company has a strong foothold and greater diversity with its RedBox kiosks and Coinstar vending machines, in addition to growth opportunities with RedBox Instant and Verizon Communications.

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The article 5 Reasons to Sell Netflix and Pandora, and Buy Coinstar originally appeared on Fool.com and is written by John Macris.

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