Goldman Sachs analyst Matthew Fassler this morning cut his rating on Barnes & Noble (BKS) to Sell from Neutral, while cutting his price target on the book retailer to $13, from $15.
“Secular challenges remain acute, with recent developments including broader stocking of e-readers across an array of retailers, undermining the value of the Nook�s shelf space and undermining BN.com�s digital market share potential,” he writes in a research note. “Earnings are under pressure. Valuation, while off its peaks, still
implies a reasonable probability of a transaction; and, following management�s recent proxy victory we believe a transaction is less likely.” After winning the proxy fight with investor Ron Burkle, he now puts the probability of a deal at 15%, down from 30%.
Adds Fassler: “We respect management�s efforts in a tough strategic situation, but the magnitude of BN.com losses have been larger than we expected, and we don�t view the firm�s efforts to diversify into non-core segments such as toys/games/seasonal merchandise as long-term remedies to the store�s challenges.”
BKS this morning is down 22 cents, or 1.4%, to $15.65.
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