Wednesday, July 21, 2010

Is Blockbuster stock out of the picture? Don't count it out just yet.

After the downgrade of Blockbuster (formerly BBI: NASDAQ), now BLOKA-PK (pink sheet), (BLOKA) kicked off the exchange since it couldn't maintain a stock price above $1, but the stock still trades OTC at $0.14 a share at this time of writing.
Given the shape Blockbuster is in right now it may be one of the riskiest stocks at the moment. However, I do believe there is some 'hope' for this company given the following analyses of this stock. The heavy competition such as Netflix and Redbox make it seem impossible for this company to survive, but there is something unique about Blockbuster that the competition doesn't have. On top of that, factor in that Blockbuster, unlike it's former rival Hollywood Video, is adapting to it's new market segment. They offer Blu Ray/DVD's through the mail and are starting to set up Blockbuster Express boxes (like Redbox). And if Blockbuster goes under, where would you catch up on some older movies or TV series (on HBO for example)? You simply can not get those at Redbox, so that's one down. When it comes to Netflix, it's all though mail or Netflix capable streaming devices like XBOX 360. Not many people have an XBOX 360 with Netflix on it, since it would require a Gold Membership and the Netflix membership, also you would have to buy a console too. A lot of people still like the idea of browsing though a video store, not to mention the requirement of a credit card. That is the uniqueness I wanted to address.
Factor in the name recognition that Blockbust has built up throughout the years and all the assests Blockbuster still has, it might have a chance to survive for just a little longer.
It depends on management and corporate reshuffle if they want to pull this off. They have a good service and branding. Blockbuster already said it is determent to put their stock back on the NASDAQ in 2011.
As optimistic as I am about Blockbuster at the moment (I'd hate to see these guys go under, I'm an avid renter myself), for the long term I just don't see Blockbuster being around anymore. Eventually technology will make it so readily available to rent movies, download games for a fraction of what Blockbuster charges. But I don't think we are that far ahead just yet.
Within a few years bankruptcy may be imminent, but until that time, there's no reason not to make money off this stock during this period. I see it's value around $0.50 or $1+ pretty soon so $0.14 sounds like a bargain, a risky bargain, but you have to take risk in order to make lots of money.
My recommendation:

STRONG SELL - SELL - HOLD - BUY - STRONG BUY
RISK FACTOR: VERY HIGH
POSSIBLE GAINS: 100% +


Disclaimer:

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