Ahead Of The Bell: Blockbuster Shares Fall

NEW YORK (AP) — Shares of Blockbuster Inc. tumbled in premarket trading Friday after the movie rental company posted first-quarter revenue well below Wall Street projections.

While its profit surpassed expectations, Blockbuster's revenue of $1.12 billion dropped nearly 20 percent from a year earlier and was almost $200 million below analyst estimates.

Blockbuster, whose brick-and-mortar store model has been challenged by rival Netflix Inc. and others, is working to lower costs and expand its revenue sources.

On Friday, Wedbush Morgan analyst Michael Pachter kept a "Strong Buy" rating on the company's shares, calling their valuation "compelling." His target price is $2.50.

"Blockbuster has completed the restructuring of its credit line, benefiting from improving credit markets, which should alleviate fears of imminent bankruptcy," Pachter wrote in a note to investors.

He added he is "confident that this management team will take the steps necessary to repair the balance sheet."

The company's shares fell 20 percent to 91 cents from $1.14 in premarket trading.