Redbox Increases McDonald's Traffic (CSTR, MCD)

Coinstar (NASDAQ: CSTR) brand Redbox is consistently driving traffic to McDonald's (NYSE: MCD) parking lots, according to a Piper Jaffray research report published today.

In the report, Piper Jaffray states, "Satellite images of 1,123 different McDonald's restaurants (455 with Redbox kiosks) throughout Q4 show that parking lot fill rates continue to be higher for locations with a Redbox kiosk vs. locations without. While this data cannot be used to gauge quarterly Redbox volumes, we believe it shows that Redbox increases store traffic and drives traffic more consistently than other amenities. It also increases our confidence that new partnerships will be formed to bring the kiosks to more locations and overall demand for additional Redbox kiosks will remain high for the foreseeable future. While the Q4 pre-release suggests visibility for the Redbox business is currently low, we do not believe the Redbox DVD kiosk story is over and we expect continued share gains from retail rental stores in the coming 1-2 years."

Recently, Piper Jaffray cut its price target of Coinstar shares from $74 to $56, as reported by Benzinga last Friday.

In today's report, Piper Jaffray notes a correlation between increased McDonald's traffic at locations with a Redbox kiosk, which could play into an increased valuation of Coinstar.

"The data shows that in Q4 McDonald's locations with a Redbox had parking lot fill rates 80 basis points higher than locations without a Redbox. We note that the difference in parking lot fill rates for McDonald's with Redbox vs. those without is a more consistently positive differential than any amenity offered at McDonald's (wireless, drive thru, McCafe, Playland, Bus/RV parking, or gas station). This datapoint suggests that a Redbox kiosk consistently drives more incremental traffic than any other amenity measured in the sample."

Coinstar shares are currently trading at $41.69, up 0.46% from Friday's market close.