Borders (BGP) One-Day Surge Not Convincing Enough - Barron's
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According to a Barron's article today, although Border's Group (NYSE: BGP) was up about 50% today, long-term prospects for the company aren't as positive.
Shares began their move yesterday, March 31, 2010, when news broke that the company re-paid a $42.5 million loan to Pershing Square Capital Management, and secured a $700 million asset-backed credit line. Additionally, the company reported an EPS of $0.91 today for Q409, doubling-up from Q408 when it had an EPS of $0.49. Revs were lower though, at $946.5 million compared to $1.09 billion.
Reasons for a little "irrational exuberance" include the company paying no dividend, having little cash on the books, and hasn't been profitable, outside of the holidays, in years.
Still, the stock is up 173% over the last 12-months.
Challenges for the company come in the form of thin, sexy eReaders that allow the user to not lug around a 30-lb. book everywhere they go in order to read a few pages. Companies like Amazon (NASDAQ: AMZN), Barnes & Noble (NYSE: BKS), and Sony (NYSE: SNE) have come out with versions of these eReader. One could even mention the Apple (NASDAQ: AAPL) iPad, but that seems a little pricey to be categorized as an eReader [though the capabilities and support from Amazon.com are certainly there].
The Sony Reader is sold is Border's stores, it should be noted.
Obviously, there are a few things a bookstore has going for it. For one, it sells physical copies of novels, hard to find in an eReader. There's something a little romantic about being able to flip a page while in your favorite reading spot. Oh, and writing notes on pages [for you students out there] is tough on an LED screen.
However, many stores sell books. And many stores do it cheaply, too. One formidable opponent entering the ring is Wal-Mart (NYSE: WMT). The retail giant has the connections and wherewithal to cut prices to evaporate margins quicker than the tears of a clown. When there's no one around.
But there is someone around, and Wal-Mart nor Amazon.com are not going to give up without a fight. In response, Border's says that they are going to open up their own internet bookstore this spring, but Barron's takes that as more of a defensive move rather than offensive.
Barron's is also skeptical of Barnes & Noble for the same reasons. They hope both can turn it around, but recommend that investors skip the cleanup in aisle "books."
Shares began their move yesterday, March 31, 2010, when news broke that the company re-paid a $42.5 million loan to Pershing Square Capital Management, and secured a $700 million asset-backed credit line. Additionally, the company reported an EPS of $0.91 today for Q409, doubling-up from Q408 when it had an EPS of $0.49. Revs were lower though, at $946.5 million compared to $1.09 billion.
Reasons for a little "irrational exuberance" include the company paying no dividend, having little cash on the books, and hasn't been profitable, outside of the holidays, in years.
Still, the stock is up 173% over the last 12-months.
Challenges for the company come in the form of thin, sexy eReaders that allow the user to not lug around a 30-lb. book everywhere they go in order to read a few pages. Companies like Amazon (NASDAQ: AMZN), Barnes & Noble (NYSE: BKS), and Sony (NYSE: SNE) have come out with versions of these eReader. One could even mention the Apple (NASDAQ: AAPL) iPad, but that seems a little pricey to be categorized as an eReader [though the capabilities and support from Amazon.com are certainly there].
The Sony Reader is sold is Border's stores, it should be noted.
Obviously, there are a few things a bookstore has going for it. For one, it sells physical copies of novels, hard to find in an eReader. There's something a little romantic about being able to flip a page while in your favorite reading spot. Oh, and writing notes on pages [for you students out there] is tough on an LED screen.
However, many stores sell books. And many stores do it cheaply, too. One formidable opponent entering the ring is Wal-Mart (NYSE: WMT). The retail giant has the connections and wherewithal to cut prices to evaporate margins quicker than the tears of a clown. When there's no one around.
But there is someone around, and Wal-Mart nor Amazon.com are not going to give up without a fight. In response, Border's says that they are going to open up their own internet bookstore this spring, but Barron's takes that as more of a defensive move rather than offensive.
Barron's is also skeptical of Barnes & Noble for the same reasons. They hope both can turn it around, but recommend that investors skip the cleanup in aisle "books."
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