Wedbush Lowers Target on Blockbuster (BBI) to $5.50

Wedbush Morgan lowers its price target on Blockbuster (NYSE: BBI) from $7 to $5.50. The firm maintains a Strong Buy rating on the stock.

The firm notes that Blockbuster's Q2 earnings results were generally in-line with the Street estimates, "although the investment in rental inventory drove rental margins slightly lower." Accordingly the firm said it adjusted its FY08 and FY09 estimates in order to reflect slightly lower margins and slightly higher comps. Wedbush sees Blockbuster reporting FY08 EPS of $0.15 and FY08 EPS of $0.40.

Wedbush's new price target on Blockbuster is based on 14x the firm's FY09 EPS estimate. With the stock trading around $2.96 today, Wedbush's lowered target represents a potential gain of more than 85% from current levels.

Blockbuster, Inc., together with its subsidiaries, operates and franchises entertainment-related stores in the United States and internationally.

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