Notable Calls

Citigroup is out with a pretty huge call on Blockbuster (NYSE:BBI) saying that despite widespread negative sentiment on BBI's proposed acquisition of CC, they believe the potential deal fits with management's current strategy and see compelling reasons for the merger.

They believe it is key to realize that a BBI-owned CC will likely look very different than today as BBI integrates CC stores into its restructuring plans (including the potential addition of beverage & gaming lounges).

otential for Meaningful Synergies - Successful integration of CC would likely drive revenue and cost synergies. Citi's conservative estimates, which assume only 2% revenue synergies and modest cost savings, point to incremental EBITDA of $433 mil in 2008 and $571 mil in 2009.

hat's the Stock Worth- - Applying pro forma estimates to a 4x '10 EV/EBITDA target multiple suggests BBI could be worth over $8/share (in-line with current target price). However, successful execution of the deal would likely drive investors to assign a valuation to BBI that is more in-line with other retailers (currently 5.1x), which points to the stock being worth almost $11.

Reits Buy and $8 tgt.

Notablecalls: I expect the stock trade close to the $3 level today. This is certainly an out-of-consensus call and will generate ample interest among traders and inst. investors.