rdbx stock Is Getting a Little Meme-y
In the past few days, shares in Redbox stock have soared more than 107.5%, rising from their July 22 level of 67.20, to their current level of 78.10. Investors and analysts alike are praising the stock for its performance. Nonetheless, it is still down more than 70% for the year to date. It is unclear what is behind this performance.
Shares are doubling in trading today
Redbox Entertainment (NASDAQ:RDBX) has been a wild ride lately. This fanciful company offers a growing streaming service that lets you rent films for the day from Hollywood studios. It also has a large network of 38,000 DVD rental kiosks. However, it appears the company is getting a little too “meme-y” for its own good.
For instance, there are a lot of rumors surrounding the company’s merger with Chicken Soup for the Soul (NASDAQ:CSSE) that is supposedly worth less than $1 per share. That’s a pretty big deal if it’s true.
But before we get to the deal, let’s take a look at what’s going on in the company’s stock price. During the last week of trading, RDBX shares have increased by 10 times its normal level.
Shares surged 107.5% on July 26 from the July 22 level
The best way to describe Redbox Entertainment (RDBX) is that it provides a lot of entertainment in a box. The company operates a rapidly growing digital streaming service that offers hundreds of content partners. Typically, this is done through a slew of DVD rental kiosks, and in recent years, the company has rolled out mobile streaming applications.
Redbox has had a pretty good year, and the company is still well-positioned for the long haul. In the first quarter of this year, the company reported total sales of $2,780 million, a 17% increase from the previous year. As of the end of May, the company’s market capitalization had reached $580 million, a figure that will likely increase in coming months.
Shares are down more than 70% year-to-date
Redbox Entertainment (RDBX) shares have been on a roller coaster over the past few months. While the stock has been trading at around $2, it has also spiked twice in the last three weeks.
The recent drop has pushed the price down to less than half its peak level from earlier this year. That’s a significant amount of money to lose.
Although RDBX shares have been on a downward trajectory since the initial public offering, they have recovered a little. On July 26, the stock surged 107.5%. It has now closed above $12 in nine of the last eleven sessions.
Despite the rally, Redbox continues to struggle with its own financials. In the first half of the year, adjusted EBITDA was negative. It burned over $22 million in cash.
Investors are saying
It’s not all bad news for Redbox stock. The company is still flush with cash, and with a stellar balance sheet to boot. While Redbox may be a bit of a chameleon in the retail space, there’s a lot of room for growth in the video rental space. That said, the company has been a tad overdue in the IPO department. Despite this, RDBX has made its presence felt. In the past week, the company has completed its largest deal yet, a merger with Seaport Global that will see both firms combining forces. As a result, the company will have a combined workforce of over 5,000 and operations in five states and eight countries.
Russell 2000 Index dropped over 23% in the first half of 2022
The Russell 2000 Index is an important benchmark for small-cap U.S. stocks. It includes stocks ranked one to 300 by market capitalization. These stocks have historically outperformed their large-cap counterparts. However, small-cap stocks are currently in a bear market.
Over the last year, the small-cap Russell 2000 Index has dropped almost 2%. This has been a key contributor to the recent market selloff. In fact, the index has been steadily declining since the November high.
However, the Dow Jones Industrial Average and the S&P 500 have not yet fallen into bear market territory. They are on pace for their fifth weekly loss in six weeks.
Redbox vs Chicken Soup merger
The deal between Redbox and Chicken Soup came together in a matter of days. However, management may have failed to accurately forecast the synergies expected from the merger. Whether or not the two companies can successfully integrate is another story.
Redbox and Chicken Soup will be merged to create an entertainment company with an extensive digital capability. It will offer an expansive network of over 36,000 kiosks across the United States. In addition, the combined company will have access to millions of targeted customers and nearly 40 million Redbox Perks members. This will increase the scale of its content production, and drive long-term revenue growth.
