After a Hard Fall, Is It Game Over for Barnes & Noble?

After the news that Liberty Media will drop most of its stake in Barnes & Noble, is the book retailer on its way out or is now a prime time to leap into its shares?

Apr 8, 2014 at 9:00AM


Source: Wikimedia Commons.

After the news broke on April 3 that Liberty Media (NASDAQ:LMCA), a media conglomerate that owns minority interests in several businesses, will divest 90% of its Barnes & Noble (NYSE:BKS) stake, the share price of the book retailer plummeted 13.5%. With its shares now trading at $19.12, investors can buy the company for almost 20% less than what it cost at its 52-week high. The fall continued on April 4, with the shares sliding another 4% in midday trading. Considering this steep price drop and Liberty Media's transaction, should investors consider this a buying opportunity for the business or is it too risky to dive into?

Liberty Media hit Barnes & Noble big-time
Before it decided to sell off the majority of its ownership in the book retailer, Liberty Media owned about 17% of Barnes & Noble. However, the bookstore hasn't been the high-flying page-turner the company hoped it might be. While it is true that from 2010 through 2012 the company grew its revenue 23%, from $5.8 billion to $7.1 billion, its growth engine quickly came to a stop.

You see, during this time frame, the primary driver behind the company's top-line growth was its Nook segment. Over the three-year period, the revenue from Barnes & Noble's Nook operation soared from a modest $105.4 million to $933.5 million. Put another way, this segment accounted for 64% of the business's growth between 2010 and 2012, and it came to make up about 25% of the entire e-book market at its peak.

Since 2012, though, things have become progressively worse for this part of the business. Due to increased competition from the likes of Amazon (NASDAQ:AMZN), the company's Nook revenue fell off a cliff. In 2013, Barnes & Noble's revenue fell 4% to $6.8 billion, driven by the 16% falloff in sales reported by its Nook segment.


Source: Pew Research Center.

This has been particularly painful for Barnes & Noble, especially at a time when Amazon's e-reader market share greatly exceeds that of Barnes & Noble's Nook. As only 24% of Americans own e-readers and Amazon has more than 50% market share, Amazon has a nice stake in the industry along with plenty of room to grow. This makes now an especially painful time for the Nook to see its slice of the pie decline.

Should investors even worry about this, though?
Based on this data, it looks as if investors should be very concerned about Barnes & Noble's prospects. On top of losing a nice chunk of revenue, the company has lost the trust of a significant shareholder. However, not everything is going badly for the company.

In spite of the poor Nook sales, Barnes & Noble has seen a general incline in revenue over the past few years. Between 2010 and 2013, for instance, the company reported that its revenue (excluding Nook sales) rose 7%, from $5.7 billion to $6.1 billion. Profits have also risen for the company if you take out its results from its Nook segment. Between 2010 and 2013, the company's operating income with the Nook excluded rose 46%, from $199.8 million to $291.8 million.

Foolish takeaway
As we can see, the picture for Barnes & Noble looks bad, and it has gotten worse over the past couple of years. The main driver behind its lackluster performance has been the company's Nook segment, which is starting to look like a wash. Liberty Media probably came to that realization and decided it would be best for its interests as a media conglomerate to divest its Barnes & Noble shares and focus elsewhere instead.

Reading the story this way while taking into consideration Barnes & Noble's acceptable operational performance (excluding the Nook) suggests that the business will probably not succeed in salvaging its Nook but that its core business is all right. Moving forward, it will be interesting to see how the story develops. However, for investors looking for an opportunity to buy into an otherwise-healthy enterprise, Barnes & Noble might make for a decent prospect at current prices.

Boost your 2014 returns with The Motley Fool's top stock
After  Barnes & Noble stock has fallen so hard and so fast, some investors are probably thinking that it's game over for the company. However, there is a possibility that buying the company's shares now could lead you to some amazing returns if a rebound occurs. Is Barnes & Noble the top stock to own for 2014 or is there something better awaiting the Foolish investor?

There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Daniel Jones has no position in any stocks mentioned. The Motley Fool recommends The Motley Fool owns shares of, Barnes & Noble, and Liberty Media. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers