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Anybody have any thoughts on BBI (Blockbuster)?

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May 10, 2009 – Comments (11) | RELATED TICKERS: BLOKA

Blockbusters stock has lagged this rally significantly.  Excepting the erroneous bankruptcy report that caused trading to halt in early March and the shares lagging for a time thereafter, one could say that BBI isn't up at all in this rally.

Yahoo lists analysts opinion as 2.3, which is unusually favorable.  Forward P/E is low.

Presumably this stock is in the toilet because its business model is in the toilet.  Its trying to make itself over, ....

And I'm curious, but I don't know anything about it.  Hoping one of you fine fools can chime in with some insight.

11 Comments – Post Your Own

#1) On May 10, 2009 at 10:04 PM, raambo (< 20) wrote:

I am curious as well, especially at the 2.3 analyst opininion, although we shouldnt always rely on analysts for an accurate reading of a company. The 611 million in leveraged free cash flow seems a bit weird as well.

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#2) On May 11, 2009 at 1:28 AM, AirForceFool (99.94) wrote:

Well, they're getting crushed by NFLX (disclaimer I have NFLX shares)... they've been crushed by their massive debt, and they're trading for a buck a share.... With the cost of maintaining brick and mortar buildings, I'm not sure how they could survive. If you're going to invest in BBI, you have to know it's a gamble... may pay off really well, but I think you'll get better odds in Vegas.

 

 

http://www.fool.com/investing/dividends-income/2009/05/08/analysts-say-this-stock-is-a-double.aspx?source=itxsitmot0000001

 

 

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#3) On May 11, 2009 at 2:21 AM, automaticaev (58.65) wrote:

I dont know.

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#4) On May 11, 2009 at 9:23 AM, Gemini846 (82.65) wrote:

1 word.

DEBT.

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#5) On May 11, 2009 at 9:30 AM, catoismymotor (38.90) wrote:

I don't see a bright future ahead for them. They are being beaten at their own game. I think Apple or Netflix would be a better place to put some of your investment dollars.

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#6) On May 11, 2009 at 9:43 AM, Slokov (< 20) wrote:

If you have ever had to deal with Blockbuster's customer service, you know that this company is doomed to fail.

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#7) On May 11, 2009 at 9:48 AM, michaelpmatherne (79.24) wrote:

I cannot fathom a way for Blockbuster to come out on top. swinging by the video store to pick up a movie to rent will soon be (if it's not allready) dead. America is a country devoted to our own laziness, and why would anyone choose to drive to the blockbuster rather than walk to their mailbox, or even better, make a few clicks on a mouse? I don't see BBI as a company nimble enough to make over their entire bussiness model to fit in with the new standard. Even if they weren't being dragged down by the expenses of physical locations and had the capital to do so, they may be to late already, having missed out on the chance to grab market share. BBI will suffer under the load of its own debt as Netfilx and Amazon usurp the movie rental industry.

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#8) On May 11, 2009 at 2:29 PM, checklist34 (99.73) wrote:

netflix, amazon, and apple are all priced too high for consideration by me.  Thats not to say that others shouldn't be in them or that they won't go way up, but I won't buy a stock today that doesn't have an upside thesis of "if it simply survives it will double" because so many stocks exist in that category.

Thanks everybody for the thoughts, I really appreciate it.

For BBI... two thigns really stand out after a night of digging into it

1.  the class B stock is this morning 68 cents -vs- 1.15 for the class A stock.  They are equivalent, except the class B stock gets 2 votes per shares instead of 1.  Historically the class B stock has never lagged the class A this much in percentage terms.

2.  you can at this time guarantee a positive outcome on BBI by

A)  buying 1.5 shares of the class B stock - BBI.B

B)  shorting 1 share of the class A stock - BBI

if BBI goes to zero you will profit 13 cents.  (you lose 1.02 on BBI.B, gain 1.15 on BBI).  If BBI goes to 5 BBI.B should go to 4.50 or something closer to its historical lag of BBI.  Then you'd have 6.75 - 5 = 1.75. 

Thats a pretty e normous piece of arbitrage...

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#9) On May 11, 2009 at 7:16 PM, Gumfactor (42.51) wrote:

I've been calling for BBI to hit zero for a couple years now. Back in 2007 I was shorting BBI, MOVI and HLYW, and my sentiment remains the same today.

Som posters here have sited their debt. Some have sited their customer service. For me it's just their business model: in this day and age of satellite television, on-demand cable programing, and streaming web tv and movies, I just don't understand why anyone would bother going to the video store. It's old technology. Real old. 

I honestly thought that BBI would be dead by now (sort of like MOVI), and I must admit that I'm surprised at its longevity. But I wouldn't get near that stock with a 10-foot pole.

Matt

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#10) On May 11, 2009 at 7:19 PM, Gumfactor (42.51) wrote:

BTW: I've also got a biiiiig long-term thumbs down on Netflix, for largely the same reason. Again: in this day and age, how can snail-mail movies be hot? I just don't get it.

Then again, if they keep improving their streaming options, and start working deals with Xbox or Playstation, they might just be able to come out of this on top.

Nonetheless, while I'm not currently short on NFLX, I think that their long-term prospects are unusually narrow and bleak.

That's my take, anyway.

Matt

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#11) On May 11, 2009 at 7:48 PM, stan8331 (97.44) wrote:

Blockbuster has no viable business model for the future, heavy debt, vast numbers of retail stores and maybe worst of all, a terrible reputation with its customers.  Maybe there's a play to make a little bit off arbitrage, but I would not want to be long BBI, no matter how cheap the stock goes.

 You can make a reasonable argument that Netflix is too pricey, but they are well aware DVD's won't last forever and are making  plans for the future, not only in terms of streaming movies, but with tie-ins that should make the service even more appealing.  Currently, they have a lot of satisfied customers who are not looking to ditch their subscriptions anytime soon.

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