Outerwall Could Sell Itself Or Spin Off Assets, Roth's Aftahi Says

Roth Capital Partners’ Darren Aftahi upgraded the rating for Outerwall Inc OUTR from Sell to Neutral, while establishing a price target of $35. The analyst said that while the company’s core business continues to struggle, it could add value via strategic alternatives and a dividend hike.

Strategic Alternatives

Outerwall announced that it had retained Morgan Stanley as a financial advisor to explore strategic and financial alternatives. “We believe logical alternatives could include shut down of EcoATM, sale of Coin, or outright sale of the entire company, among others,” analyst Darren Aftahi wrote.

Dividend Hike

Outerwall has doubled its dividend, increasing it from $0.30 per quarter to $0.60 per quarter. Debt repayment appears to be a better option, Aftahi commented. He explained that although Outerwall’s free cash flow does support the dividend hike, it would be good to see a further deleverage of the company’s balance sheet.

“We are increasing the multiple we assign on our sum of the parts valuation. In particular, our EV/’17 EBITDA for Redbox increases from ~2x to 3x, bringing our fair value to ~$35, our new PT,” the analyst added.