1. Barnes & Noble Education, Inc. (NYSE:BNED)
Number of Hedge Fund Holders: 10
Barnes & Noble Education, Inc. (NYSE:BNED) is a company that sells and rents new and used print textbooks, digital textbooks, and publisher hosted digital courseware through physical and virtual bookstores. On December 6, Barnes & Noble Education, Inc. (NYSE:BNED) posted earnings for the second fiscal quarter, reporting earnings per share of $0.47, beating market estimates by $0.04.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Royce & Associates is a leading shareholder in Barnes & Noble Education, Inc. (NYSE:BNED) with 1.7 million shares worth more than $1.9 million.
In its Q2 2023 investor letter, Greenhaven Road Capital, an asset management firm, highlighted a few stocks and Barnes & Noble Education, Inc. (NYSE:BNED) was one of them. Here is what the fund said:
“Barnes & Noble Education, Inc. (NYSE:BNED) runs bookstores in partnership with colleges. They are going through a business transformation to a model they call First Day Complete – a partnership with the colleges where all course books are billed through the school for a flat fee per student. For schools that have transitioned, BNED revenue increases by 90% and gross profits grow by 130%. This fall, the number of First Day Complete schools will grow by more than 50% but the total will still be less than 25% of the overall schools.
In the last letter, I wrote that, “as best as I can tell, the number of people modeling the company’s economics if they are successful with the First Day Complete transition is tiny.” To my knowledge, it was three people consisting of an activist who then joined the Board, and two investors I found on Twitter using pseudonyms. In an effort to both grow the number of people trying to model this nanocap and to check my assumptions, I tweeted that I was starting a Barnes & Noble Education modeling group. It has been surprisingly productive. The number of people who have actually modeled the company has multiplied.
I remain convinced that there is a legitimate path to well over $100M per year in EBITDA for this sub-$70M market cap company. This coming year will be a challenge since not enough schools have transitioned to First Day Complete and there is debt to be refinanced, but I see a path to an 8-10X return from here if the debt gets restructured, allowing the equity holders to realize the benefits of First Day Complete. Each passing day we are a day closer to the First Day Complete transition and a properly capitalized business.”
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