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$2.40 0.04 (1.69%)
8/29/2008 4:05 PM

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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Avatar NetscribeRetail (53.25) Submitted: 1/18/07 12:33 AM : Underperform Start Price: $6.61 BBI Score: 53.65

Nothing Blockbuster about it.

Blockbuster together with its subsidiaries, engages in the operation and franchise of entertainment-related stores in the United States and international. The company offers prerecorded videos, as well as video games for in-store rental, and also sells other entertainment-related merchandise. With 8500 stores spread all over, Blockbuster operates an online service offering movie rentals, which are delivered by mail.

Consumer spending in-home viewing is projected to increase in the coming years. Video game industry is also prospering and launching of hardware consoles like Xbox 360 and Sony Play station further aids its growth. Additionally, online DVD rental market is set to boom in U.S and Europe in the coming years. However, Blockbuster has failed to reward itself in this lucrative industry, and the company is piling on huge losses. Of late, store closures and shutting down of international units have been the order of Blockbuster’s business thereby hampering their international business that form around 33% of the revenues. Additionally, rising piracy worldwide poses another threat to the industry.

To add to the woes, the year to date financial performance of the company has been shattered with sales decrease in rental as well as merchandise business. Also, revenue growth rate and same-store sales have been negative for quite some time now. With the recent upswing of 6% in the stock price, Blockbuster’s news of reaching goal of 2 million online subscribers appears as discounted. Management is upbeat on ‘Total Access’, a program to grow their online subscriber base at a faster rate. However, the benefit is likely to materialize only in the long-term. In view of all the above factors, the stock price is expected to slide in future.

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Avatar NetscribeRetail (53.25) Submitted: 6/05/07 4:53 AM

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Blockbuster Inc is certainly not doing justice to its name. Its recent performance is anything but blockbuster. The company’s business model is under scrutiny as it faces heat from superior delivery platforms such as digital video recorders, on-line distribution and retail mass merchant sales of low-priced DVDs.

Its 1Q’07 results highlight the sluggish performance of its top-line as rental revenues which accounts for more than 70% if its revenues saw a slight dip. This coupled with the fact that spending on marketing rose 95 percent meant that net loss Blockbuster's net loss widened to $46.4 million, or 26 cents a share, from $1.9 million, or 3 cents, a year earlier.

However not all is gloomy for the stock. During the first quarter Blockbuster added 800,000 customers whereas Netflix's, its principal rival, managed to add only 481,000. The successful launch and subsequent traction in its online platform “Total Access” has enabled the company to double its online subscriber base in the last six months.

The company is clearly focused on superior delivery platforms (online) for the incremental growth. However, as of now is in investment mode and hence in short o medium term its margins are likely to be under pressure.

Blockbuster is clearly is in a transition phase. Weak financial performance, structural issues such as piracy and alternate delivery platforms would cast its shadow on the stock. The stock might do well in the long run if its online platform becomes profitable. However the concerns on this stock outweigh its long term potential positives. Hence it might be prudent to stay away from this stock in the medium term.

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