Wherever you sell a stock, there's a buyer willing to take it off your hands. The market is a very large arbitration machine that settles differences of opinion in real dollars and cents, and there's always an ongoing back-and-forth debate between the buyers and the sellers.
As the wider market goes, so goes the fate of individual stocks. A case in point is video-rental operator Blockbuster (NYSE:BBI), which has taken its fair share of beatdowns lately, and yet some market agents have voted with their wallets in support of the company.
Last Friday, a JPMorgan Chase (NYSE:JPM) analyst downgraded Blockbuster's stock from essentially a "buy" to a "hold." He said that the bricks-and-mortar stores are doing so poorly that the raucous growth of the online service hardly matters. Competition from online rental specialist Netflix (NASDAQ:NFLX) has forced Blockbuster to take drastic measures in promoting its own Internet service, at the expense of profitability and revenues in the local stores.
It's still not a "sell" rating, because Blockbuster is sitting on enough assets to support current price levels, the analyst said. London-based equity investment firm Marathon Asset Management went a step further and increased its already substantial stake in the company by 4.1%. It's now the seventh-largest Blockbuster shareholder, with 4.3% of the shares and 11.3% of the voting power under its control.
Morgan Stanley (NYSE:MS) took an even bolder leap of faith, nearly doubling its Blockbuster holdings over the last six months amid all the criticism the video peddler has faced. Morgan Stanley has vaulted to the position of the single largest stakeholder, with 9.6% of all shares, from a fifth-place position six months ago. Blockbuster director Carl Icahn is now No. 2 with his 8.9%. And in his "Mad Money" show last Thursday, Jim Cramer told us to buy the stock. Booyah!
So who's right, and who's wrong? Our Motley Fool CAPS community still thinks that Blockbuster is a value destroyer, giving the stock a single star. The 12 highest-rated players with an opinion on the company have all rated it "underperform," and the bears outnumber the bulls both on the all-star level and in the general player population.
There has been an influx of positive ratings lately, though, typified by this comment from kbrkal:
"Blockbuster with the new Total Access plan will chip away at Netflix and when they finally offer downloadable movies it will be game over."
Indeed, the Total Access program, which lets you return movies to your local store rather than waiting for the mailman's turnaround time, has brought in a remarkable amount of new customers since its launch in early November. CAPS player idarak doubts that it's a net positive for the company, though:
"Total access is great, customers love it, it even managed to get good number of customers from Netflix to Blockbuster, but are they making money out [of] it? I don't see clear visibility on this stock at this point."
I agree with idarak here. Will all those spiffy new subscribers stick with Blockbuster Online and Total Access once the trial periods expire and the honeymoon is over? Netflix has already started rolling out its direct-download service, which looks like a very effective countermove to the local-store convenience of Blockbuster's parade number. If the idea is to cater to an audience hungry for immediate movie-watching satisfaction, I think a streaming download that starts at the drop of a hat works better than jumping in the car for a trip to the movie store. Global investment bank UBS AG (NYSE:UBS) seems to agree, having sold 22% of its Blockbuster stock in the past few months, dropping from third to fifth on the ownership chart.
That's where the rest of the world stands. What do you think? Let us know by logging into Motley Fool CAPS today and sharing your thoughts on Blockbuster -- or any other stock, really -- with the world. We'll all be smarter for it.
Further Foolishness:
- The Next Netflix?
- Netflix Finally Lives Up to Its Name
- Blockbuster's Brazen Bet
- Blockbuster's Millions
Netflix is a Motley Fool Stock Advisor recommendation, and an honorary Rule Breaker off the scorecard. Grab a free 30-day trial to either service, or both, to see tomorrow's biggest names today. JPMorgan Chase is an Income Investor pick.
Fool contributor Anders Bylund is a Netflix shareholder and customer, but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is good for the long run.
