1 Stock That's Going to Zero

The following video is part of our "Motley Fool Conversations" series, in which consumer goods editor and analyst Austin Smith discusses topics across the investing world. In today's edition, Austin discusses one stock that he believes is going to zero. In his opinion, the writing is on the wall for this company, and it's more than just fancy text by notable authors. Even with an increase in revenue, the company is burning cash quickly, and falling victim to the trend of online shopping. It's tough to stay afloat when you've got bricks and mortar around your feet.

Barnes and Noble is just one of the companies that's falling victim to this trend. To learn about more, and how to profit from its collapse, be sure to read our report, "The Death of Retail," which highlights two companies hand-picked by Fool analysts that are set to dominate the future. To check out these two companies and learn more about the future of retailing, click here now -- it's free!

Austin Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Amazon.com. Motley Fool newsletter services recommend Apple, Amazon.com, and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 23, 2012, at 11:20 AM, darnelc21 wrote:

    Next time you do a video like this why don't you try memorizing the material or actually just knowing what your talking about instead of reading cue cards the entire time you hack. I dont know if you have ever had a positive report on a company either. We see enough bad about the economy and companies every day in the news so why don't you give us something positive or somehting to look forward to instead of signing a death certificate every week. You also might want to take back your idea of "The death of retail". With rising fuel costs it is going to start to cause a major rise in shipping costs when you look at individual orders versus a retail store that can transport goods in bulk at a lower per item rate. Prices will skyrocket soon enough and people will go back to buying most products from "Brick and mortar" stores because by the time you factor in shipping costs it wont be the $10 book on amazon versus the $25 book at B&N. It will be the $25 dollar book that takes 2 days to get to you and you don't even know if its the right item until it gets there, versus the $25 dollar book I can pick up in a store 15 minutes from my house.

  • Report this Comment On February 23, 2012, at 11:21 AM, mmaximazarov wrote:

    In April of last year the stock was at 9 bucks, now it is at almost 13, how is that unscrupulous stock bashing working out for you? Anyone reader can look back Motley Fool's posts can notice that the same things they say are good for Amazon, are somehow bad for BKS. Can it be that bashing of BKS for a year now by children wearing ties is a bad idea of Motley Fool?

  • Report this Comment On February 23, 2012, at 11:48 AM, leonhart03 wrote:

    I love how everyone here thinks they can magically predict the future because of the last year of activity. Yes, there are indicators. Yeah, there are a few red flags. But Brick-and-Mortar business just isn't going away any time soon. There are still many, many people who simply have too many troubles with ordering online

    - Late/Lost orders

    - Wrong item sent

    - Double charging

    the list goes on. And all of this falls on the shopper to call a 1-800 number and be on hold for who knows how long. Bookstores like B&N have the ultimate convenience of being able to walk in, set their problem at the customer service desk, and know that a manager is available to help them in a fraction of the time.

    Sure, B&N is spending a ton of money building their nook brand. But look at the success they have seen. According to various analysts, nook holds somewhere between 26 and 30% of the market for ebooks, which is second place behind Amazon's Kindle. And considering B&N is significantly smaller than Amazon in terms of...well, just about everything... it won't require near as much market share to keep them afloat and generating profits in the near future. And then there's the potential expansion overseas that has potential to generate even more revenue. Yes, B&N is definitely in a restructure and grow phase, but they are far from dead.

    Personally, I am interested to see what the numbers will look like in May when their 10-k is released.

  • Report this Comment On February 23, 2012, at 2:48 PM, TMFTomGardner wrote:

    Barnes & Noble's only non-bankrupt exit scenario is to sell. A few years ago, I wrote this article:

    http://www.fool.com/investing/general/2010/07/21/barnes-nobl...

    So far, two of the killer Bs have gone under. I think BKS can avoid it if they can find the right suitor. Nevertheless, I think the core business is heading toward zero -- and I agree with Austin.

    Finally, I take no pleasure in their demise. It would be great if BKS and other retailers could find ways to create remarkable experiences that cause people to come out and shop. But the tide of consumer behavior is much too ferociously against them.

  • Report this Comment On February 23, 2012, at 3:14 PM, JohnMaxfield37 wrote:

    If anyone doubted the dire state of the bricks and mortar book industry, BKS's most recent release made it clear.

    In the first holiday season since its only notable competitor went out of business, its comp sales excluding digital devices (which appear to be loss leaders) was up a pathetic 4.2%.

    So something like 10-15% of bookstore customers evaporated over the course of one year. Consequently, it's not The Motley Fool that's put BKS on its current path, but rather the consumer.

    Though, BKS certainly isn't helping itself. Two years ago, it bought the college division for a ridiculous $500+ million from the company's Chairman of the Board. That purchase is one of the reasons the company is listing so heavily -- as much of its worthless "Goodwill" assets came from that transaction. It was a questionable deal to put it mildly -- very very mildly.

    In other words, if you're upset about the direction of bricks and mortar bookstores and you want to point fingers, then you might want to start there.

  • Report this Comment On February 24, 2012, at 10:24 AM, TMFBWItime wrote:

    @darnelc21

    You can read about my many positive positions on stocks here: http://www.fool.com/author/1945/index.aspx?source=iapsitlnk0...

    You’ll note I’m upbeat on many stocks that others are very downtrodden on, including SUPERVALU and Netflix.

    I also feel you bring up a crucial point about shipping costs, however Amazon is adding more fulfillment centers across the country, 17 in 2011, which should minimize the burden of shipping. Also, I believe it is very telling that bricks and mortar stalwart companies like Best Buy and Wal-Mart have heavily pushed free shipping services in order to remain competitive against Amazon. If Wal-Mart, the case study of operational excellence, is adding this to their business model, I wouldn’t dismiss it as a whim.

    @mmaximazarov

    Our “unscrupulous stock bashing” is an effort to educate readers about what we see as a long-term loss leader in the stock market. As an investment community, we welcome all opposing opinions so that investors can make the best decisions. I encourage you to post on the boards if you feel we’ve missed something. I am not wearing a tie in the video, FYI.

    @leonhart03

    I 100% agree with you that bricks and mortar stores aren’t going away, in fact, over 90% of consumer goods purchases are still made at bricks and mortar locations. However, Forrester Research projects that e-commerce makes up 11% of total retail sales today. Consider that in 2010 they actually projected e-commerce to not break the 10% barrier by 2014, and you see that this industry is accelerating faster than even the best experts have projected.

    The point I’m making here is that if this trend continues Barnes and Noble will quickly be 100% reliant on their still loss-making Nook. I don’t like that proposition.

    Thanks to everyone for tuning in, and Fool on!

  • Report this Comment On February 24, 2012, at 3:54 PM, TMFBWItime wrote:

    Of course I meant to write, "almost 90%" instead of "over 90%"

    My apologies for the typo.

  • Report this Comment On February 25, 2012, at 8:58 PM, foolindeed1 wrote:

    Oh boy, Fool's is probably owned by Amazon. I see no other explanation why so-called "analysts" of this web site so much in love with Amazon while they constantly trash all and any Amazon's competitors like Netflix, Barnes & Noble, Apple, etc.

    The bias of Fool's site is so obvious that it 's not even funny. Does anyone with a brain out there even pays attention to what this site writes anymore?

    I doubt it very much...

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