Why This Analyst Thinks Barnes & Noble Is Worth $36/Share

Shares of Barnes & Noble, Inc. (NYSE: BKS) closed up 6 percent on Wednesday (after Tuesday's tumble) set in motion by its third quarter earnings report. In a report issued Wednesday, Maxim Group analyst John Tinker looked into the results and concluded that "businesses are turning." Consequently, he reiterated a Buy rating and a $36 price target on the stock.

Related Link: Barnes & Noble Shares Q3 Results

The analyst highlighted three points from the earnings call:

• Retail comparable sales grew 1.7 percent, on a 1.7 percent decline in overall revenues, to $1.96 billion.
• EBITDA rose 14 percent quarter-over-quarter to $197 million. However, it came in below the firm's forecast of $211 million, mainly because of higher college investment costs. Gross margin ascended to 34.6 percent, from 33.4 percent, partly on the back of increased vendor allowances. In addition, management "expects to close 13 stores this year rather than the initial 20 forecast."
• "Balance sheet net cash of $325M (about $4.60 per share) facilitates College spin and potential BKS buyback/dividend."

The $36 price target is based on "simplification, bringing pure-play retail and education industry investors into the stock."