Finding a Bottom in Blockbuster?
What a ride it’s been in Blockbuster the last 6 months.
On Nov 2, 2006 Blockbuster reported an excellent 3rd quarter. While revenue was down slightly and they posted a loss of $27.5 million they in fact made alot of money. Free Cash Flow was $136 million because the loss was due to an accounting number for Depreciation and Amortization of $159 million (see pg. 6, The Cash Flow Statement).
The stock blasted through $4 on pretty good volume and continued to rise pretty much everyday for some time after, eventually peaking just over $7 in the middle of March.
Then the stock traded down, closing at $6.21 on Tuesday May 1 – the day before it announced 1st quarter earnings.
1st quarter earnings came in worse than expected on high costs from fabulous growth in its Total Access program. The stock got hammered down to $5.40 on heavy volume as I wondered “Was It Really So Bad at Blockbuster This Quarter?”.
But that was just the beginning. Over the next 7 weeks, from Thursday May 3 through yesterday Tuesday June 12 the stock continued to fall on an almost daily basis as it seemed as if every single shareholder was selling. The shares seemed to find some support yesterday around $4.
The stock lost more than 40% of its value from its peak in March to its recent low yesterday!!!!
Now, this morning, Citigroup upgraded the stock from “Hold” to “Buy” saying that the high cost of its Total Access program is now in the shares. I’ll say!!!!!
The stock is up about 8% to $4.27 (as of 2:00pm EST) on a strong volume.
I wonder if this will mark a local bottom for what has been a real roller coaster ride.