Investor Beat -- The Failure of the Nook

Barnes and Noble gets crushed on the market, yet again. How far can the book seller fall? Plus, Yelp sees its day in court, Plug Power makes a smart buy, and one thing to watch for from CarMax's earnings report tomorrow, on Thursday's Investor Beat.

Apr 3, 2014 at 8:22PM

Barnes and Noble was the biggest loser on the New York Stock Exchange today, with shares falling more than 13% on news that Liberty Media, which purchased a large stake in Barnes and Noble three years ago, will now be selling 90% of that stake. Is this the beginning of the end for the embattled book retailer?

On Thursday's Investor Beat, host Chris Hill and Motley Fool analyst Jason Moser discuss Barnes and Noble, and the failure of the Nook. Jason sees the nook as something that will one day soon be completely edged out by the competition, but he also gives several good reasons why the actual book stores for Barnes and Noble aren't done yet, and why the company can still stay afloat if it shifts its focus back to these core competencies.

Then, shares of the consumer review website Yelp are falling today, after the Federal Trade Commission said it has received more than 2,000 complaints about the company during the past five years. Now, a case involving a local business hurt by an anonymous Yelp review is going to be heard in the Virginia State Supreme Court. Is it time for Yelp to make some serious changes? Chris and Jason take a look at the "rock and a hard place" situation facing Yelp today. On the one hand, traffic to the site and the resulting revenue from advertising depend on the idea that consumers are honestly informed from all angles by the reviews they read on the site. On the other hand, the power of a negative review on Yelp,and its ability to crush a business, far outweighs the benefits of receiving a positive review. With no system of checks and balances in place to screen for which reviews are undeserved, businesses can be needlessly damaged by Yelp's current system.

Also, shares of Plug Power are up yet again today, after the fuel-cell company that many investors see as a play in electric vehicles garnered massive returns, and showed investors an unbelievably volatile ride during the past year. Today's gains were on the news that the company would be buying ReliOn, a fuel-cell technology company, in a $4 million all-stock deal. The guys look at the performance of Plug Power's stock during the past couple of years. While Jason sees the acquisition using all stock as incredibly smart by management considering how expensive the stock is today, he sees the dilutive event as one that should give investors some concern. With the company at 40 times sales today, Jason sees this one as incredibly expensive, and one that he'll be watching from the sidelines.

And finally, Jason tells investors what he'll be looking for when CarMax reports earnings tomorrow morning. The company is recommended as a core stock among David Gardner's stock recommendations in the Motley Fool's Stock Advisor service, and Jason will be looking to see whether the company's no-haggle business model is continuing to perform, as reflected by unit sales. Jason will also be watching for the effect the harsh winter weather had this quarter, which hit many retailers very hard, particularly auto dealers.

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Chris Hill has no position in any stocks mentioned. Jason Moser has no position in any stocks mentioned. The Motley Fool recommends CarMax and Yelp. The Motley Fool owns shares of Barnes & Noble and CarMax. 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.

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