Stock Option Investment Advice

Analysts Excited about Blockbuster Video (BBI)

Blockbuster Video (BBI) has been generating a lot of business among stock research analysts as of late. The company recently reported a strong fourth quarter earnings season. Analysts had widely expected 17 cents per share profit for the company, and it beat those estimates with 18 cents per share earnings.

The leading contributor to the surprise earnings was a larger than anticipated revenue number. Analysts had suggested a consensus revenue estimate of $1.437 billion. The company reported actual revenue of $1.567 billion.

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Stock trading has been sluggish for the company as of late, with a recent 52-week low of $2.66 per share. It wasn’t that long ago the company’s stock was trading over $7 per share. Blockbuster had been burdened for some time because of a poor performance by its online subscriber services.

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Netflix has been the online leader in rentals. Blockbuster raised its online program prices significantly a few months ago, in part, to drive customers back into its stores. It was a risky move for the company, but executives new the subscriber program was not working as a good long-term profit generator for the company.

Jim Cramer and others have recently pushed strongly for stock investing price shoppers to add the company’s stock to their trading portfolio. Cramer notoriously built up the company’s potential at its previous bottom before the spike to over $7. He then sold and has been on hold. He and others now believe the company is available at a great discount. Consensus one year target price estimates have the stock at $6.25 looking ahead.

One benefit to Blockbuster that gives its stock help is the same economic condition that is hurting many companies. Video rental businesses tend to do better in uncertain economic times like those facing the US. Lower and middle-class consumers often look to cheaper forms of entertainment, such as videos, as opposed to expensive movie theater tickets when funds are tight.

Along with the broad economic picture, many analysts cite new company direction in their report about the stock. Executives have been pushing the company as an entertainment retailer as opposed to just a movie rental store. The company wants to be a leading seller of movies, games, and other items going forward.

Covered call investing or covered call strategies may have been popular stock trading maneuvers in recent months, as long-term investors may have been looking to short-term plays while the stock struggled. In going through his analysis of the stock at its peak, Cramer discussed many signs to sell stocks that were glaring with Blockbuster. Now, he says, all signs are “go” and it is time to buy.

The Fed gave the stock market help by agreeing to inject $200 billion to help struggling financial markets. This move, along with business conditions specific to the company, should help propel it forward in a strong fashion.

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