NEW YORK (TheStreet) -- Shares in Barnes & Noble (BKS) - Get Barnes & Noble, Inc. Report have been rising recently after a Barron's report saying that the company's share price will more than double over the next year. The Barron's report, "Beware a Low Bid for Barnes & Noble," was published March 2, 2013, and gives the company a price target of $38 -- quite an increase from $16.33 this morning.
To put that number in perspective, the book seller was under $14 a share toward the end of February and trading at just $15.63 when the markets closed on Friday, March 1. As of the close of trading that next Monday, shares stood at $16.46, marking an increase of roughly 5% over a couple of days. This from a company whose one-year price target currently averages $18.40.
Investors seem pleased by the idea of Leonard Riggio, the book seller's founder, chairman and leading shareholder, buying the retail arm of the company. So, why the enthusiasm?
At $16.35 a share (closing price on March 18), the retailer is valued at $965.99 million or about half of Nook Media's $1.8 billion valuation from investors a year ago. What Riggio would pay for the retail side is unclear. Estimates are anywhere from $500 million to twice that amount, says the
attributed the stock price increase, from under $14 in late February to almost $16 when the company published its report, to the disclosure of Riggio's interest in bidding for the retail operation.
"The retail outlets alone could be worth $19 a share or more, meaning that investors are paying nothing for the now-unprofitable but strategically valuable Nook," writes
OK. Sure. The Nook is likely worth more than zero and the product has been self-financing. Further, the company is currently eyeing the Nook as a vehicle for digital textbooks, which could be a real boon should the device catch on, but that is a pretty big "if."
The Nook just isn't that popular.
Really, how much value does the Nook actually have?
There are a couple of issues at work. According to
The Huffington Post
, Barnes & Noble lags the competition in total apps -- about 10,000, vs. more than 60,000 on the Kindle Fire and 275,000 on the iPad mini. The Nook also falls short in the number of movie titles, does not offer a camera, and has no mobile features.
Back in January 2012,
CEO Greg Maffei suggested that Nook would be more appealing to investors as a stand-alone entity.
Maybe that is exactly what the Barnes & Noble needs to push the Nook to the next level. And, realistically, bookstores are a dying business.
In any case, the point here is that the company has been talking about doing something for over a year and yet the Nook offerings remain little changed, despite losing market share -- even amongst tablets based on
Android system, which includes both the
Kindle and the Nook.
According to a
published in January 2013, "Amazon's Kindle is leading the charge for Android, holding 33% of the market among other Android Tablets. Distantly behind Amazon is the Nook with 10%, Samsung Galaxy series with 9%, and Google's Nexus 7 with 8%."
I don't recommend shorting Barnes & Noble, at least not yet. Granted, the company is in a dying business and the Nook is losing market share by the minute, but there actual books are not dead yet, and they won't be for some time yet.
Going forward, keep a watchful eye. Things are likely going to get very volatile for Barnes & Noble.
There is still the chance that the book seller could attract some attention from some very big players. One possibility is that
investment last year could point to something. Granted, the company makes its own e-readers, such as the Surface tablet, but there is no reason that the Nook couldn't join that product line in one for or another.
I think it is more likely the company was getting into position to bolster its tablets from its competition with Amazon -- of course, whether those efforts pay off is another story all together.
At the time of publication the author had no position in any of the stocks mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.