Blockbuster Inc.'s stock climbed, but then erased its gains throughout the day Thursday after the video rental company reported it swung to a first-quarter profit that topped Wall Street's expectations.
Blockbuster, which is trying to buy electronics retailer Circuit City Stores Inc., swung to a first-quarter profit of 20 cents per share. Analysts polled by Thomson Financial expected income of 15 cents per share.
Arvind Bhatia of Sterne, Agee & Leach Inc. applauded the bigger-than-expected decline in Blockbuster's selling, general and administrative expenses as well as the profitability of its online subscription service, Total Access. The hybrid online and in-store video rental plan lets customers rent videos online that are then mailed to them but which can be exchanged in Blockbuster stores for other rentals.
The analyst maintained a "Buy" rating and $5.75 price target.
Last week, Circuit City said it would allow Blockbuster to conduct due diligence in its takeover bid of just over $1 billion with plans for creating a huge chain that would sell electronic gadgets and rent movies and games. The company also agreed to open its books to Blockbuster's largest shareholder, billionaire investor Carl Icahn, who alleviated concerns about Blockbuster's ability to finance the transaction by saying he was prepared to buy Circuit City if all else fails.
Shares of Blockbuster fell 2 cents to close at $3.05, after earlier climbing as high as $3.44. Over the past year, the stock has traded in a range of $2.52 to $5.80.
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