Blockbuster Stock: Why Today Could Decide Its Fate

Blockbuster's second-quarter earnings report may be the final straw for creditors. Is this the final scene for the movie renter?
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NEW YORK (

TheStreet

) -- It's rare that one quarter can make or break a company, but in the case of

Blockbuster

(BBI) - Get Report

, that may indeed be the case.

Blockbuster is, of course, also on deck to repay $42 million in debt on Friday

, which it deferred last month to give itself more time to prove to creditors that business trends are turning.

The struggling movie rental retailer is set to report its second-quarter earnings after the market close today and analysts are calling for a loss of 24 cents a share on revenue of $840.1 million.

The company cancelled their call with analysts that typically takes place after the earnings release, citing "the sensitive nature" of ongoing recapitalization efforts.

"We believe Blockbuster's core business is recovering slightly, giving creditors incentive to allow it to recapitalize," Wedbush analyst Michael Pachter wrote in a note.

Meanwhile, Blockbuster's 28-day head start over rivals

Netflix

(NFLX) - Get Report

and

Coinstar

(CSTR) - Get Report

on access to movies from Fox, Universal and Warner Brothers should give it a slight edge. The liquidation of

Movie Gallery

, its predominant brick-and-mortar rival, is also expected to have grown market share for Blockbuster toward the end of the second quarter.

Blockbuster, in its defense, isn't going down without a fight. Over the past month the company has rolled out

several new initiatives

, in an effort to prove that it can keep up with its rivals.

This week the company added video games to its Blockbuster by Mail service, and also teamed up with

Comcast

(CMCSA) - Get Report

to launch DVDsByMail.com, a site that allows Comcast subscribers to sign up for its mail service at a discounted rate.

Blockbuster is also offering its Canada members a $9.99 per month plan that will allow them to rent unlimited movies (one at a time).

Still, there's no denying that company's future remains challenged, at best. "In our opinion, most consumers are motivated by price, are generally unaware of a DVD's

launch date, and are likely to discover availability when visiting their local Redbox kiosks, rendering the 28-day head start inconsequential over the long run," Pachter wrote.

"Market share losses appear to be accelerating at a faster rate than Blockbuster can diversify its revenue sources," Pachter added, "and any benefit from the 28-day window or from Movie Gallery closings is likely temporary."

For those shareholders left still holding onto Blockbuster after the company was delisted from the New York Stock Exchange last month and began trading over-the-counter, there really doesn't seem to be any upside potential for the stock, Pachter said.

Blockbuster was delisted from the NYSE after shareholders failed to approve a recapitalization plan, which would have included combining Class A and Class B common stock, or the option for a reverse stock split, which was necessary to comply with listing requirements.

-- Reported by Jeanine Poggi in New York

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