NEW YORK (AP) _ Movie Gallery Inc., the nation's No. 2 movie rental chain, saw its shares slide to a fresh 52-week trough Thursday after an analyst warned the company may be running low on cash.
Bear Stearns analyst Glen Reid cautioned investors that he now expects the company to record negative cash flow this year rather than starting in 2007.
Movie Gallery has been calling lenders requesting covenant relief for all of 2006, according to DebtWire, a news service read closely by bond traders, which the Bear Stearns analyst cited in his research report.
A Movie Gallery spokesman wasn't immediately available.
First-quarter trends look weak, according to the analyst, as industry data that show movie rentals in stores and online are down 7 percent. With rentals online consuming in-store rentals, stores could see double-digit declines, he said.
Meanwhile, Blockbuster Inc. _ the No.1 movie rental chain _ upped the ante by doubling the number of free in-store rentals available to subscribers to its online service.
The analyst slashed his 2006 earnings estimate for Movie Gallery to 12 cents from 83 cents and cut the stock's price target to $1 from $3.
Shares of Movie Gallery slid 51 cents, or 21 percent, to $1.96 in midmorning trading on the Nasdaq. The stock has plummeted over the past year, from a $34.13 high in June to a previous low of $2.45 on Wednesday.
In February, the Alabama-based company said it had planned to resume talks with its lenders about making changes to its credit facility.
At the time, Movie Gallery also backed its outlook for the fourth quarter and said it believes it complied with all of its loan's requirements during the period. Reid sees fourth-quarter profit of 41 cents per share. On average, analysts expect earnings of 31 cents per share.
Both Blockbuster and Movie Gallery have faced tough competition from online movie-subscription services such as Netflix Inc. While both Blockbuster and Movie Gallery shares have suffered losses, Netflix shares have been on the rise.