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September 30, 2005 Stock Pick: Blockbuster Inc. (BBI)

Stock Price: $4.75

Blockbuster Inc. is a provider of rental and retail movie and game entertainment, with approximately 9,100 stores in the United States. Blockbuster has the largest share in the market for U.S. video rentals, at 40%.

Blockbuster shares are now at their lowest point in their history. Increased competition and company decisions have forced the company into a corner. Blockbuster even had to cut their latest quarterly dividend. Blockbuster lost $140 million in revenue alone just by eliminating late fees.

Even though BBI is being slammed, we believe in the long run they have made the right decisions with their brand name in entering into the online movie rental business and eliminating late fees. These two moves should go a long way with their customer base.

In our mind, Blockbuster is the only major bricks and clicks movie rental entity. The online business will eventually succeed more so than their stores. It is much easier to find a movie through their website search than going to the store, which may not even have the movie in stock.

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