$0.63
0.01 (+1.95%)
Blockbuster, Inc. (BBI)
CAPS Rating:
The Company is a global provider of in-home rental and retail movie and game entertainment, with over 8,000 stores in the United States, its territories and 22 other countries.
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I think Blockbuster is finally catching on. They're making some hefty moves towards online movies, which is the next big thing. The trickiest part of their whole business at this point are the brick-n-mortar stores and the waning demand for on-site movie rentals. If they can make use of them (turn them into music, video game, movie stores?), then great, but otherwise, they need to ditch them. Kiosk units are very popular now as well (RedBox), so they could gain some market share there as well. Overall I think they're making the moves they need to.
online movies wont save this one. They have one major problem... they have too many actual stores. Now it is possible if they hang around for a few years until the economy turns around that they could sell the stores and get some cash... or its possible that they might use the stores as more of a retail electronics outlet... but they can't survive on movies... the fact that they have started changing rules on their DVD by mail subscribers makes me think they are going to be hurting. I will be switching to Netflix because of the changes and I know a lot of other user that will too... Long term they are most likely dead... That said for the short turn may a 6 month window I thin they are a buy.... but only for the short term bounce.
"Turn-around stocks seldom turn around " - Warren Buffett
Blockbuster has the overhead of maintaining and staffing it's umpity million stores which Netflix doesn't have. Blockbuster's stores don't have as much selection as the Netflix Web site, and people don't have time to go find a parking place, root through poorly-categorized DVDs and then wait in line to check them out when they could do it online in the comfort of their desk chair. Blockbuster's online rental system isn't as slick as Netflix and it costs a bit more in the end. They have almost no presence in the download/streaming movies marketplace, which is divided up pretty well right now between Netflix, Apple, and cable companies' on-demand services. I don't see how Blockbuster can win in any situation regardless. It's another Movie Gallery. Last one out, turn out the lights.
I own some in my IRA, I believe a good risk reward tradeoff under $2.
Long B makes sense.Long 2 Class B and Short one Class A no brainer. BBI class B has two votes otherwise identical in every other way. BK your even. collapse the shares to simplify structure you make 90%. Use EBITDA to refi and push out maturities stock flies and you have home run. Historically when stock was not so low it traded almost always at a 2-5% discount. Use to be because the B with two votes issued from Viacom stake was not in index.Redstone had to sell B stock in margin call a while ago and the credit crisis has never allowed itself to normalize. Anyone owning A should swap to B uneqivocally. Hedgies had long B short A 1-1 on going into credit crisis. Some were/are being forcibly liquidated and computers just sell B and buy A. That has to be ending. Mgmt wants to collapse stock and fundamentals justify a higher price based on risk reward anyway. Selling international Biz and refi and push out maturities and they can pay down debt and accrete value to equity as Ebitda to entrerprise value gets normalized from 2-3 to 1. If Neflix comes in and offers stock and refis debt dropping cost of capital and drops interest differential to bottom line those earnings can be capitalized at 70% of Neflix multiple making earnings fly and stock price hum. Of course economies of scale in mail and digital business are excellent, as both know the physical and by mail delivery mechanism have limited lives. When the combine share classes the stock will takeoff without shorts keeping BBI for sale while the smart money buys the class B.