Shares of Redbox Entertainment (RDBX) are under pressure on Tuesday morning after jumping over 40% on Monday alone despite the lack of news to justify the huge stock movement. Discussing the self-service kiosks operator, B. Riley analyst Eric Wold told investors in a research note that the 300% share rally since Redbox recently announced securing an additional $50M in financing opens the door for the company to re-accelerate its digital growth strategies that have been put on hold as management sought out additional liquidity options.

AMC-LIKE CAPITAL RAISE PATH: The 300% share rally since Redbox Entertainment announced securing an additional $50M in financing opens the door for the company to re-accelerate its digital growth strategies that have been put on hold as management sought out additional liquidity options, B. Riley analyst Eric Wold told investors in a research note. Given the recent experience with AMC Entertainment (AMC), the analyst could see Redbox taking advantage of a strengthened share price to further bolster its balance sheet through additional equity issuance. Not only could this help the company reduce its debt balance, but it also could provide an "attractive path" toward a diversification strategy, Wold wrote.

Given his continued belief in the opportunity for the Redbox kiosk network to address the ongoing content needs of the target demographic — especially in an environment where subscription video on demand platforms, or SVOD, are beginning to hit a subscriber wall — the analyst sees the value of additional financing to help Redbox get past the current content drought. With his optimism that Redbox and its sponsors would be able to secure financing at terms that were relatively simple and without terms that were onerous to equity shareholders, he could see an opportunity for "meaningful share appreciation" on positive financing news. On that note, Wold views the favorable terms associated with that $50M financing as an indication of faith toward the company's ability to recover and get back on track with the original growth strategy.

With a "robust" 2022 film slate beginning to take shape this spring and summer, the analyst remains optimistic that rental patterns will begin to return to more normalized levels during 2022 and heading into 2023. With Redbox providing the most robust choice of rental options and low-priced physical options, Wold expects prior market share to recover and remain in place with that film slate. More importantly, he believes the significant stock price move in recent weeks — which, he acknowledged, has more than likely been aided by the growing appeal to retail investors — also opens the door for Redbox to re-accelerate digital growth strategies that have been put on hold or delayed as management sought out additional liquidity options. The analyst reiterated a Buy rating on Redbox with a $10 price target.