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Pastimes : Home on the range where the buffalo roam
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To: CFA who wrote (13366)12/16/2004 12:46:30 PM
From: CFA  Read Replies (1) of 13815
 
<<BBI at $7 seems to offer the same great risk/reward trade-off as Intel at $13, Time Warner sub-10, and NOK at $11>>

Blockbuster broke $10 today and seems to have lots of momentum, as Carl Icahn just jumped on board, saying that it's undervalued.

Blockbuster's management has thoroughly impressed me over the past 6 months, launching new initiative after new initiative. I think that Blockbuster will be the Apple of 2005.

Here's a short list of what's happened to Blockbuster over the past 6 months:
(1) Split from Viacom and became independent
(2) Launched an in-store unlimited monthly rental plan (MoviePass)
(3) Launched DVD and Game Trading (return any DVD to a Blockbuster store and receive at least $5 store credit)
(4) Launched online DVD rentals
(5) Made a bid to acquire its main offline rival, Hollywood Entertainment
(6) Ended Late Fees

Over the next next few months, Blockbuster is expected to link its website with its stores, which should give it a sustainable competitive advantage over all other competitors.

Within 6 months, I think that Blockbuster will partner with Amazon, whereby Amazon will provide a great website and Blockbuster will provide distribution. I doubt that Amazon is going to do online DVD rentals on its own, as it will have to spend hundreds of millions opening dozens of new distribution centers and stocking DVD libraries.

When I purchased BBI at an average of $7.4, I was hoping for $10. However, I'm holding my shares and think that it will hit $12 in the short-term and $18 over the next 12 months.
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