Will Barnes & Noble Stock Rebound?

With shares of Barnes & Noble (NYSE:BKS) trading around $14, is BKS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Barnes & Noble is a content, commerce, and technology book-selling company that provides customers access to books, magazines, newspapers, and other content across its multichannel distribution platform. The company operates 1,338 bookstores in 50 states, 647 bookstores on college campuses, and one e-commerce site, and develops digital content products and software. Barnes & Noble operates in three segments: B&N Retail, B&N College, and Nook.

Recently, Barnes & Noble reported earnings and revenue numbers that exceeded Wall Street’s expectations. The revenue beat is a great sign to investors who seek growth out of the company.

T = Technicals on the Stock Chart Are Weak

Barnes & Noble stock has been volatile in recent times. The stock is currently selling off after a negative earnings report. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Barnes & Noble is trading below its key averages, which signals neutral to bearish price action in the near term.

BKS

Source: Thinkorswim

Taking a look at the implied volatility and implied volatility skew levels of Barnes & Noble options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Barnes & Noble Options

44.47%

0%

0%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

September Options

Steep

Average

October Options

Steep

Average

As of Tuesday, there is average demand from call buyers or sellers, and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bearish over the next two months.

E = Earnings Are Decreasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Barnes & Noble’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Barnes & Noble look like, and, more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

-10.26%

-110.37%

-125.35%

76.47%

Revenue Growth (Y-O-Y)

-8.53%

-4.70%

-8.82%

-0.39%

Earnings Reaction

-12.85%*

-17.05%

3.34%

-11.15%

Barnes & Noble has seen decreasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been disappointed with Barnes & Noble’s recent earnings announcements.

* As of writing.

P = Weak Relative Performance Versus Peers and Sector

How has Barnes & Noble stock done relative to its peers – Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), and Google (NASDAQ:GOOG) — and sector?

Barnes & Noble

Amazon

Apple

Google

Sector

Year-to-Date Return

-2.65%

14.77%

-5.39%

22.88%

12.15%

Barnes & Noble has been a poor relative performer, year to date.

Conclusion

Barnes & Noble is the last remaining nationwide bookstore, and it continues to struggle against current competition. The company recently reported earnings that did not please investors. The stock has been volatile and is currently seeing a good amount of selling pressure. Over the last four quarters, earnings and revenues have been declining, which has disappointed investors in the company. Relative to its peers and sector, Barnes & Noble has been a weak year-to-date performer. WAIT AND SEE if Barnes & Noble can stabilize this coming quarter.

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