Is Barnes & Noble (BKS) a Book Store or "Technology Company?"
Long-Term Horizon, Biotech, Tech, Growth At A Reasonable Price
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Barnes & Noble appears to be the stock market's cheapest technology stock with a low price to entry of only $250 vs. an (AAPL) iPad or (RIMM) Playbook. The recent (GOOG) Android app upgrade doesn't hurt either. Last reported, the company has received over 1 million NOOK Android App downloads by NOOK Color customers, proving that they really do have a viable contender to the iPad or Motorola Zoom.
We have been watching this stock since it broke out in the $10 range and was alerted to the massive surge in options a few weeks ago which tells us that something is clearly brewing with this company! In addition, we have noted that the short interest has climbed to over 14,000,000 shares because some hedge funds may have felt that Barnes was headed in the same direction as Borders and may have regarded this company as a dinosaur.
Not so! Does Borders have a successful Color Nook or eReader or tablet? Barnes also just revised their billion dollar line of credit so their business growth looks in tact financially and another new eReader is set to be announced early next week. Oops, shorts have clearly miscalculated on this one!
On May 6, Barnes & Noble initiated with a Buy at Janney Capital with a $20 target. This might be too low? Some analysts say that to the right company looking to get into the tablet market, the color Nook could be worth billions to the right acquirer.
We strongly feel that $20 is very doable especially if Borders cannot find a complete buyer for all of their locations and Barnes ends up taking all of their physical book store marketshare. This would bolster their revenues considerably and help the company's surprisingly successful Nook e-reader/tablet and give it tremendous upside potential as noted by people in the industry. So where's their growth comoing from? Well, JP Morgan estimates that there will be about 48 million tablets sold in 2011 and 79.6 million sold in 2012 and Barnes is already gaining market share in the 28% - 30% range.
Barnes is no longer just a brick and mortar bookstore chain, but has a technology element as well, so the valuation should rise YOY and should now be seen as becoming a technology company in the same mode as its competitor, Amazon.com (AMZN). It only makes sense!
Barnes & Noble is clearly a company to watch as their popular technological devices become even more popular with the hard back readers and tablet buyers. Keep watching! Barnes should continue to gain traction in the coming months.
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