Barnes & Noble, Inc. (BKS) Is Not Doomed

Page 1 of 2

Barnes & Noble, Inc. (NYSE:BKS) is well on its way to becoming profitable again, despite all the negative attention associated with Barnes & Noble, Inc. (NYSE:BKS) and the sensationalizing of digital media formatted books along with the cheaper content collection provided through the Amazon.com, Inc. (NASDAQ:AMZN) book store. The fact is that there are people who prefer buying books in a retail store. In fact, I prefer buying books in person. The current short interest as a percentage of the float is 38.15%. If any of you are caught shorting the stock of Barnes & Noble, Inc. (NYSE:BKS), you should be cautious of the potential upside catalysts that could cause the stock to appreciate in a parabolic pattern.

Source: Barnes and Noble (NYSE:BKS)

Barnes & Noble, Inc. (NYSE:BKS) book stores (retail) have generated revenue growth of 1.4% in fiscal year 2012, and 0.7% revenue growth in fiscal year 2011. While I am willing to agree that the amount of growth that is presented by the stock is not anything substantial, I would also like to state that the growth is fairly reasonable in light of the fact that investors are short the stock hoping that the company may at one point file for bankruptcy.

Amazon.com, Inc. (NASDAQ:AMZN) was able to grow revenue in its media division (which includes books, music, movies, video games, software, and digital downloads) by 13% year-over-year in 2012. Amazon’s revenue growth is declining in its media division which may imply that Barnes & Noble, Inc. (NYSE:BKS) position as a brick and mortar store isn’t being subdued by its online rival. In fact, it may imply that the market for physical books will remain intact, for quite a while longer. Even if physical books were to become obsolete, the obsolescence will take many more years to fully play out, based on the revenue statistics Amazon.com, Inc. (NASDAQ:AMZN) and Barnes & Noble have been able to present for the most recent fiscal years.

Barnes & Noble, Inc. (NYSE:BKS)

One of the most dangerous things about shorting retail companies, especially diversified retail companies, is the large store foot print. Retail companies can turn a quick profit just by closing stores. Examples of this include Safeway, which was able to close 50 of its unprofitable stores between 2009 to 2011 and was able to generate net income of around $500 million. Barnes & Noble, Inc. (NYSE:BKS) closed over a hundred stores over the past year in order to generate profits. I have observed that time and time again, brand loyalty, and the intangibles add further value to the business than what accountants are willing to acknowledge.

Source: Barnes and Noble

Barnes & Noble stores will most likely generate a profit in the immediate future due to two overriding factors.

1. Barnes & Noble stores are generating revenue growth. This means that consumers are willing to walk into a book store and buy paper copies of a book. This implies that Barnes & Noble is not operating a legacy business model.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!