Wedbush Reiterates Outperform as Outerwall (OUTR) Looks to Maximize Value
Wedbush reiterated an Outperform rating and $40.00 price target on Outerwall Inc. (NASDAQ: OUTR) following the company's announcement that it will explore strategic alternatives. Management also announcement that it increased the dividend by 100%. There have been no changes to Wedbush's model, as Outerwall will likely have enough free cash flow to continue share repurchases at the pace currently modeled.
Analyst Nick McKay commented, "In its press release on Monday, March 14, Outerwall announced that it raised its quarterly dividend to $0.60 from $0.30 prior. The new dividend will be payable on June 21 to shareholders of record on June 7. Additionally, Outerwall announced that it will explore strategic alternatives to maximize shareholder value. In February, activist shareholders Engaged Capital sent a letter to Outerwall’s Board of Directors encouraging the company to 1) discontinue all growth investments, 2) manage the core businesses for improved cash flow, 3) sell ecoATM, 4) discontinue share repurchases, 5) increase the dividend, and 6) explore options to sell the business. In its press release Monday, Outerwall stated that it will manage its businesses for profitability and cash flow, focus on expense management, and return significant cash flow to shareholders with a preference for dividends and debt retirement. As it explores strategic alternatives, we assume that it will seek buyers for both the ecoATM business as well as exploring an option to take the company private."
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Shares of Outerwall Inc. closed at $34.39 yesterday.