Trade Alert: Reading the writing on the wall at BKS
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.
