Netflix (NASDAQ:NFLX) shares rallied some because Wedbush Morgan analyst Michael Pachter upgraded the stock to "Hold" from "Sell" and raised his price target to $18 from $15. Part of the rationale is that Movie Gallery (MOVI)is expected to give up the ghost by the end of this calendar year. He also expects Blockbuster (BBI) to reduce marketing spending.
Yes, Movie Gallery has been parked in front of the coroners office for some time now. If they close 1,000 stores everyone will pick up a piece of a shrinking pie for a little while.
The future is online downloads. Neither Netflix or Blockbuster are good at downloads. At this stage in the game if either had figured out downloads ,the market would have bought in.
Essentially, Netflix and Blockbuster are about to replicate Movie Gallery. There may be some residual marketing values in the name that a download service may want. These brand values are eroding fast.
Netflix and Blockbuster are on the "Highway to Hell". Some temporary share price appreciation will most likely not hold in anything approximating the medium to long term.
NFLX / BBI 1-year chart