Blockbuster: Is a Turnaround Still Possible?

Blockbuster (BBI) could be running out of time.

GimmeCredit analyst Kin Noland downgraded the firm’s rating on the struggling video store chain to Deteriorating from Stable, pointing to the surprisingly strong Q4 from Netflix (NFLX), as well as the increasingly precarious state of rival Movie Gallery, parent of the Hollywood Video chain.

“DVD rentals and sales are experiencing a secular decline and pricing continues to fall as consumers use their computers and TV’s to start watching movies by instant download,” Noland writes. “This shift in consumer viewing likely will make kiosks less attractive over the long term as well. We remain concerned that Blockbuster is so over-leveraged, it may not be able to turn around and will end up in a debt restructuring.”

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