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Wall Street: Up on Netflix, Down on Blockbuster

6 Aug, 2007 By: Erik Gruenwedel

Netflix stocks are said to be headed upwards, while Blockbuster credit facilies have been downgraded.

The rollercoaster stock fortunes of online rental pioneer Netflix Inc. and Blockbuster Inc. took another twist Aug. 6 when two Wall Street stalwarts opined divergent short-term guidance on the two companies.

Investor publication Barron's Aug. 5 reported that Netflix's stock was primed for a resurgence after withering months of TV ads espousing the benefits of Blockbuster's Total Access online rental, in-store program.

Netflix, which in its most recent financial results posted a first-ever decline in subscribers, also was branded by Barron's as a prime acquisition target by Amazon.com.

The report said Blockbuster, which has poured millions into marketing Total Access, will eventually have to raise its online subscription prices — a reality new Blockbuster CEO Jim Keyes alluded to in a recent financial call.

“At some point, Blockbuster will cry uncle and raise prices, and Netflix shares will almost certainly rally,” Barron's said.

Separately, Moody's Investors Service downgraded Blockbuster's corporate family and senior secured credit facilities ratings, citing failure to meet first-and second-quarter analyst expectations.

Netflix shares closed Aug. 6 up 39 cents, to $16.96 per share, while Blockbuster closed down 8 cents, to $4.11.

Representatives from Amazon.com, Netflix and Blockbuster were not immediately available for comment.

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