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Trade Alert: Reading the writing on the wall at BKS

June 10, 2014 by Cody Willard

Nook is dead. BKS to follow. I told you I’d continue looking for the next opportunity and I think I’ve found one for us.

I think we’ve been handed a terrific opportunity to short Barnes & Noble BKS. The stock has rallied big over the last few months and it’s back to above $20 where I’d frequently cited it in the past as a short opportunity. Barnes & Noble is irrelevant as a retailer, a joke as a tech company, and I expect five years or sooner from now, we’ll find it struggling to avoid complete bankruptcy. The good news for their own shareholders is that they’ve not got billions of debt to service. The bad news is that the company is facing continued declines in revenue and has no earnings estimates in site for years to come.

The stock popped yesterday on this news:

A partnership to develop co-branded Samsung Galaxy Tab 4 NOOK tablets that feature the award-winning Barnes & Noble digital reading experience.

The co-branded devices will combine popular Samsung Galaxy Tab 4 hardware with customized NOOK software to give customers powerful, full-featured tablets that are designed for reading, with easy access to Barnes & Noble’s expansive digital collection of more than three million books, leading magazines and newspapers.

The companies are expected to introduce Samsung Galaxy Tab 4 NOOK in a 7-inch version in the U.S. in early August. The co-branded tablets will be prominently displayed along with NOOK ereaders and sold at Barnes & Noble’s nearly 700 bookstores across the U.S. and online at bn.com, one of the leading e-commerce sites.

The only meaningful news is that entire press release is that somebody considers bn.com to be “one of the leading e-commerce sites.” Zinger! Slightly more seriously though, the Nook is already a failed product and a failed brand. Barnes & Nobel bragging about bringing back Nook would be like Microsoft bragging about bringing back the Zune MP3 Player. Where’s my PalmPilot?

So I’m adding BKS to the portfolio on the short side today, starting off with a small first tranche while I can get it borrowed and short-sold here above $20/share. I’ll try to add puts to the BKS bet in the next few days or weeks too.

 

 

 

Related posts:

Trade Alert: Short move PLUS Internet of Things and GoPro vs AMBA
Trade Alert: I spy puts (and the Virtual Reality Revolution)
Un-Trade Alert: Earnings didn't save it, so what's next for the stock market now?
Trade Alert: More longs and shorts + Market analysis
Trade Alert - Adding some broker puts as tension builds
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Filed Under: Trade Alert

Disclosure: At the time of publication, the firm in which Willard is a partner and/or Mr. Willard had positions in some of the stocks mentioned above although positions can change at any time and without notice.

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This does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or cryptocurrency or token any other product or service by Cody Willard or any other third party. Furthermore, nothing in this is intended to provide tax, legal, or investment advice and nothing in this should be construed as a recommendation to buy, sell, or hold any investment or security or cryptocurrency or token or to engage in any investment strategy or transaction. You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your business advisor, attorney, or tax and accounting advisor regarding your specific business, legal or tax situation.

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