Lots of analysts are forecasting the end for Barnes & Noble (NYSE:BKS), but I feel that kind of prediction is short sighted. It's the "paper books will become extinct" argument, therefore since B&N is a bookstore, it's going to go out of business. I have a different viewpoint, and I think that not only will B&N survive, but it will establish itself as a necessary store in this new technological era.
While I'm not disagreeing that non-electronic books will eventually become obsolete, we are very far from that point. Most people who like to read in the U.S., especially the baby boomers, prefer the paper kind. In other countries, hardly anyone uses e-readers. The phasing out of non-electronic books in the U.S. and the world will take decades. Barnes & Noble has plenty of time to experiment with their stores to add other items like games, toys and electronic gadgets, to see which products sell the best.
Barnes & Noble will continue to transform and reinvent itself into a successful retail store in a new tech world. This is something that Borders and Books-A-Million didn't have the foresight to do. Now, Borders are closing up, and Books-A-Million has teamed up with B&N to sell Nooks. And since the Nook is in every B&N store, it's a great way to convert die-hard paper book fans. They can try it out right there in the store, while the Kindle isn't available to experiment with in bookstores.
People go to a B&N store for a different shopping experience than other stores. At Best Buy (NYSE:BBY), people go in to quickly look for what they need to buy and then leave. People go to Starbucks (NASDAQ:SBUX) to have a tasty drink and socialize or read. Barnes & Noble stores are a happy medium between the two. People can go in, browse all kinds of different books and gadgets, and then sit down for a drink and socialize or read. Now that Borders and Books A Million are downsizing, Barnes and Noble will dominate this specific retail niche.
Analysts often make the assumption that Barnes & Noble's Nook will be destroyed by Amazon's (NASDAQ:AMZN) Kindle Fire. This is quite a tall assumption. Is there some rule that everyone in the world must conform and everyone only buys the Kindle or the Nook? Is the market not big enough for both? No, of course it's big enough.
Not only this, but I have also heard from my sources that technology experts say that even though the Kindle Fire has been getting all the attention and publicity, the Nook is actually much better. Once users realize how much better the Nook is, it could steal market share from the Kindle.
There are a lot more e-readers being sold than the Nook and Kindle. There's the Kobo, the Sony Reader, the BeBook Neo, the Pandigital Novel, the ECTACO jetbook, and more being created at this moment. The Nook and Kindle were the first movers, so they have already established the biggest followings. Techcrunch reported that millions of Nook e-readers have already been sold.
B&N now has also come out with a Nook Tablet. In my view, B&N only grows in revenues from here. The analysts who think it won't last keep the stock price low for smart investors. Once the investing world realizes that B&N is here to stay, the stock should make its way to the high teens.
Disclosure: I am long BKS.