Bigger Concern Behind Bad News From BBI
Analysts at Janney Capital Markets downgrade Blockbuster (NYSE: BBI) to “neutral.” The fair value for BBI has been reduced to $0.75.
Blockbuster has cut its adjusted EBITDA outlook for FY09 from $270-$290 million to $195-$205 million, as compared to the estimate of $245 million and the Street consensus of $238 million. The analysts say that “the reduction comes as a disappointing surprise given the incremental improvements in title slate, reduction in underperforming stores, added title depth, and the critical cash flows associated with the fourth quarter.”
The analysts mention that while the news is bad, the bigger concern is that the new guidance “implies that in-store rental comps have actually gotten incrementally worse since 3Q09 despite the aforementioned improvements… Essentially, it appears BBI is losing more market share than expected.” Janney Capital Markets has reduced its EPS estimates for 2009 and 2010 from $(0.72) to $(0.95) and from $(0.20) to $(0.58), respectively.
