Gloomy Future For Barnes & Noble, Inc. (BKS)

Peer comparison

Amazon.com, Inc. (NASDAQ:AMZN), the world’s largest internet retailer was a winner by selling physical books at a lower cost online. There has been 27% growth in sales in the past twelve months; even the first quarter of 2013 has shown a 22% rise in sales over the last year.

Kindle Freetime Unlimited, which was launched few months ago, has content to attract kids and parents – books, games, educational apps, movies and TV shows. With increasing demand, a thousand new titles have been added to Kindle Freetime Unlimited in just six months.

Amazon.com, Inc. (NASDAQ:AMZN) will also start publishing more original comics and graphic novels through Jet City Comics. These comics will be published on the Kindle, which is supposed to have done the most damage to Barnes & Noble, Inc. (NYSE:BKS)’s e-book business.

Apple Inc. (NASDAQ:AAPL) with a PE of 10.9 and earnings growth rate of 11.43% for fiscal year 2013 has a PEG of just 0.82.

Apple Inc. (NASDAQ:AAPL) has recently announced a $30 million iPad deal with Los Angeles School Board of Education, the country’s second largest school district. This will lead to a large distribution of iPads to students across the school district.

The iPad is hard to compete against, and this can be understood by the fact that nearly 10 million iPads are already used by students in the world today. This can be considered a first step towards acquiring a larger unconquered school market of Los Angeles. Therefore, Apple Inc. (NASDAQ:AAPL)’s growth strategy also serves as a negative for Barnes & Noble, Inc. (NYSE:BKS).

Conclusion

The retail books business is declining, and this is reflected in Barnes & Noble, Inc. (NYSE:BKS)’s financials. Further, competing with giants like Amazon.com, Inc. (NASDAQ:AMZN) would be tough for Barnes in the digital book business, which might have provided a growth avenue for the company. The digital business is not generating profits with tough competition from products like the Kindle and iPad. As a result, I would not consider Barnes & Noble as a good investment opportunity. On the contrary, investors having exposure to the stock can consider switching to a better investment opportunity.

The article Gloomy Future For Barnes & Noble originally appeared on Fool.com and is written by Anjum Khan.

Anjum Khan has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com and Apple. Anjum is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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