Analysts at WedBush Equity Research maintained their outperform rating for the shares of Outerwall Inc (NASDAQ:OUTR) and price target of $78 per share as well as their 2014 earnings estimate of $6.45 per share after activist hedge fund, Jana Partners, acquired a 13.5 percent stake in the company.

Outerwall

The shares of Outerwall are undervalued

In regulatory filing, Jana Partners stated that the shares of Outerwall Inc (NASDAQ:OUTR) are “undervalued and represent an attractive investment opportunity.” The activist hedge fund indicated its intention to discuss with the board and management of the company regarding a review of strategic alternatives and other issues to execute changes to increase shareholders value.

WedBush analysts, Michael Pachter, Nick McKay, and Nick Citrin believed that Jana Parters could attract other fellow shareholders to support any of its proposals to the leadership of Outerwall Inc (NASDAQ:OUTR).

Pachter and his fellow analysts stated that they had been skeptical on many of the new venrtures entered by Outerwall Inc (NASDAQ:OUTR), and questioned the amount of time it had taken to bring promising initiatives to the market. The analysts noted that even if its coffee and ecoATM ventures have some potential, they are uncertain with its other initiatives. According to them, other analysts share the same skepticism.

The analyst projected that Outerwall Inc (NASDAQ:OUTR) will be able to generate $300 million in free cash flow annually if Jana Partners succeed in encouraging the board and management of the company to carry out its plans.

“It is likely the OUTR see its free cash flow rise well above historical levels, and that the company will return that cash flow to shareholders,” state the analysts in their note to investors. Outerwall Inc (NASDAQ:OUTR) is included in the WedBush Investment Committee’s Best Ideas List.

The company cut its FY13 revenue forecast

Last month, analysts at JP Morgan North America Equity Research issued an underweight rating and $49 price target for the shares of Outerwall Inc (NASDAQ:OUTR) after the company reduced its FY13 revenue guidance. The company cut its FY13 revenue forecast because of weaker-than-expected average revenue per rental and increased promotional discount activity.

The company expected to generate third quarter revenue of around $569 million to $589 million, down by 6% from its midpoint range. For the fiscal year 2013, Outerwall Inc (NASDAQ:OUTR) reduced its guidance in the range of $2.274 billion to $2.339 billion. Its core adjusted EBITDA was expected to be approximately $451 million to $471 million and core diluted EPS at around $4.72 to $5.12 per share.