RedBox has been the centre of attention over the past two weeks as its stock price has climbed 250%. The price has risen from $2 and now sits above $7, having hit a high of $11. Are we likely to see an AMC type of move next?
Redbox Automated Retail is an American video rental company specialising in DVD, Blu-ray, 4K UHD rentals, and formerly video games via automated retail kiosks.
The stock does have a lot of short interest, reminiscent of AMC in January of 2021. RedBox seems to have a business model that is outdated, also similar to GameStop. So is this a short squeeze or is there something else driving this move?
Instead of a renowned “short squeeze”, it seems to be genuine investor interest in the stock. Analysts have seen increased investor comfort following recent financing announcements. They announced in mid-April that they had secured $50M in additional financing and this was seen by some as a cushion ahead of an anticipated rebound in business trends later in the year.
Eric Wold of B. Riley Securities has a similar stance on the company; “With RDBX most likely in a situation where additional capital and a greater stock float could be of a benefit to the company, we would not be surprised if RDBX took advantage of this strong move in the equity in the near future to shore up its balance sheet,” he noted.
RedBox actually has a short interest of only 19%, much below the usual figures seen before major short squeezes.
RedBox may see some consolidation around $7 after an extended move up. This would be needed for further continuation. If the stock does continue with this momentum, we could see $14 which has been a resistance point for the stock previously.
After a strong move on Monday, the price rejected off $11 (up 83% from Fridays close of $6). The price eventually closed on Monday at $8.50. This could be an indication of buyers exhausting after a 450% move from $2. If the price fails to hold Mondays low of $6.43, we could see the price drop back down below $5.
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