Redbox Stock is Ready to Be Rented

Movie rental and streaming service Redbox NASDAQ: RDBX stock is making higher lows after completing its business combination. The Company merged with special purpose acquisition company (SPAC) Seaport Global Acquisition Corporation on Oct. 22, 2021, to find its way onto the public markets. The Company originally started off selling home products, snacks, electronics in its famous red kiosks but evolved to DVD rentals and movie streaming services in its 20 years of existence outliving Blockbuster Video. The Company also offers free ad-supported selected streaming movies in a deal with WarnerMedia NASDAQ: DISCA. It’s now stands alone (literally) as the one-stop to actually rent physical DVDs live (not through the mail). Adding the streaming options through its app helps it to grow its network of consumers and subscribers as it evolves as a digital company. Prudent investors seeking another way to get exposure in the streaming and DVD rental business can look for opportunistic pullbacks in shares of Redbox.

RDBX Financials

According to the Redbox investor presentation, the Company did $829 million in 2019 revenues, which sank to $546 million in 2020 due to COVID-19. The Company projects 27% CAGR to $1.122 billion by 2023 off the 2020 lows with $40 million in digital revenues to grow to $384 million by 2023. The drop in 2020 revenues was due to COVID-19 impact of a (-50%) drop in new releases. New releases drives DVD rentals. The Company has 39 million loyalty members and 46 million email subscribers. The transactional video on demand service (TVOD) launched in 2017 calculates a customer acquisition cost of $3 per customer. Since DVD renters are considered late adopters, Redbox sees them as attractive conversions to its digital operations. Its digital network includes DVD rentals, free live television, free on demand, premium 3^rd party channels and subscription for a multi-product digital service. Redbox also plans to develop its own exclusive content with plans of 36 titles per year.

The Digital Ecosystem

Redbox Chief Strategy Digital Officer Jason Kwong explained, “Our vision and goal is to build a multi-product digital ecosystem that gives our customers the greatest choice. Think of it as a one stop shop for a variety of content and content services, which we will tailor to super serve our highly value-conscious and late-adopter customer base, and further differentiate by delivering greater value through our Perks loyalty program that is currently 39 million members strong... If you look closely at this ecosystem, it starts to look like a traditional MVPD or cable service, where you can flip through a ton of linear channels, rent new release movies on demand, and subscribe to premium services like HBO and Showtime, all within the context of a single service. And that's where we see the opportunity.”

RDBX Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provide a precision view of the landscape for RDBX stock. The weekly rifle chart peaked at the $27.24 Fibonacci (fib) level. Shares took a steep sell-off to the $11.80 level to stage a bounce attempt. The weekly 5-period moving average (MA) support slipped at $13.71 with a rising 15-period MA at the $11.17 fib. The weekly stochastic is starting to cross up off the 20-band. The daily rifle chart has been downtrending with a falling 5-period MA at $12.77. The daily stochastic crossed down again off a 20-band rejection pushing shares towards the daily lower Bollinger Bands (BBs) at the $20.28 fib. Bulls will need a breakout through $14.37 to trigger a daily  market structure low (MSL). Prudent investors can watch for opportunistic pullback levels at the $11.80 fib, $11.17 fib, $10.28 fib, $9.75 fib, $9.15 fib, and the $8.75 fib. Upside trajectories range from the $16.64 fib towards the $23.99 fib level.