Option Trade 
Barnes & Noble, Inc. (NYSE:BKS) Puts 
Monday, 05th September, 2016

** OPTION TRADE: Buy the BKS OCT 21 2016 11.000 put at approximately $0.70. Place a pre-determined sell at $1.40.

Note: No protective stop losses added -- but if you wish to do so make it $0.30.

by Ian Harvey

September 05, 2016

Barnes & Noble, Inc. (NYSE: BKS), a contract operator of bookstores on college and university campuses across the United States and a provider of digital education services, will report its fiscal first-quarter numbers on September 8. The company will report before the market opens, with the consensus calling for a loss of nine cents per share.

The company has not had the best track record with earnings in recent quarters, posting negative earnings surprises six out of the last seven quarters, so it would not be a shock to see a bigger-than-expected loss for its first-quarter as well.

It only took a year for the struggling brick and mortar book retailer to fire its CEO, Ronald Boire. The board says it was “in the best interests of all parties” because Boire was “not a good fit,” and has asked Executive Chairman Leonard Riggio to postpone his retirement party and serve as acting chief executive while the company searches for a permanent replacement.

News like this makes for plenty of optimism, and ask, “How long will Barnes & Noble be still open?” “Can brick-and-mortar outfits like Barnes & Noble survive the Internet?” The answer is clearly yes, but not well.

C-Suite dramas are always reliable downside catalysts, especially for a stock due to drop regardless. Following a Sell Signal Stack, BKS typically loses -27.92% over the following 10.88 weeks. If BKS were to give us another typical down-cycle, it would drop to $9.23 quite soon. The previous low at $7.07 is a mighty intriguing possibility here.

Barnes & Noble, Inc. is heading into 2nd half of this year hoping that the 6 month downtrend will reverse itself, as it has been stuck in a fairly tight trend since the start of March – but there seems to be quite some doubt in this respect. Over the past half year shares are down -3.14% over that time frame. More recently the stock is 1.41% over the past 5 trading days. Looking a bit further out the stock is -9.28% for the month and 1.64% for the quarter.

Barnes & Noble has a 12-month low of $7.25 and a 12-month high of $16.37. The stock has a 50 day moving average of $12.66 and a 200 day moving average of $11.60. The company’s market capitalization is $856.83 million.

Hedge Fund Sentiment

Quinn Opportunity Partners Llc decreased its stake in Barnes & Noble Inc (NYSE:BKS) by 81.89% based on its latest 2016Q2 regulatory filing with the SEC. Quinn Opportunity Partners Llc sold 269,820 shares as the company’s stock rose 34.64% with the market. The institutional investor held 59,683 shares of the consumer services company at the end of 2016Q2, valued at $738,000, down from 329,503 at the end of the previous reported quarter. Quinn Opportunity Partners Llc who had been investing in Barnes & Noble Inc for a number of months, seems to be less bullish on the $847.02M market cap company.

Analyst Input

Barnes & Noble Inc. (NYSE:BKS) was downgraded by Zacks Investment Research from a “buy” rating to a “hold” rating in a research note issued to investors on Tuesday.

According to Zacks, “Barnes & Noble, Inc. is engaged in the retail sale of trade books (generally hardcover and paperback consumer titles, excluding educational textbooks and specialized religious titles), mass market paperbacks (such as mystery, romance, science fiction and other popular fiction), children’s books, off-price bargain books and magazines. These collectively account for substantially all of the company’s bookstore sales. Bestsellers represent only a small portion of the Barnes & Noble store sales. “

Also, several other equities research analysts have recently commented on the company.

• Gabelli downgraded Barnes & Noble from a “buy” rating to a “hold” rating in a research note on Wednesday, August 17th.

• TheStreet downgraded Barnes & Noble from a “buy” rating to a “hold” rating in a research note on Wednesday, May 4th.

• Finally, Sidoti initiated coverage on Barnes & Noble in a research note on Thursday, August 18th. They set a “neutral” rating and a $13.00 target price for the company.

Five investment analysts have rated the stock with a hold rating and one has assigned a buy rating to the stock.

Harvey’s Options Volatility Indicator


Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the BKS OCT 21 2016 11.000 put at approximately $0.70. Place a pre-determined sell at $1.40.

Note: No protective stop losses added -- but if you wish to do so make it $0.30.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.

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