When Will Investors Admit To Themselves That Barnes & Noble Education Could Be A Buy?

Barnes & Noble Education Inc BNED reported Wednesday fiscal-year 2018 first-quarter results, with consolidated sales rising 49 percent to $355.7 million, thanks to the MBS Text Book Exchange acquisition.

The sales growth came despite a 2.5-percent drop in comps.

On an adjusted basis, the company reported a loss of $29.78 million compared to a loss of $25.89 million last year.

Investors haven't taken kindly to the results, sending the shares of Barnes & Noble Education shares down for the second straight day.

Shares were down 8.56 percent to $5.13, on top of the 17.8 percent slump Wednesday.

However, BWS Financial analyst Vahid Khorsand has a Buy rating on the shares of Barnes & Noble Education and a $14 price target.

The analyst noted that this was the first quarter to fully integrate the MBS Textbooks acquisition. Additionally, the analyst noted that the company's campus bookstore business, Barnes & Noble College finally turned a corner on declining general merchandise sales.

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BWS Financial believes the story at Barnes & Noble Education has evolved, with additions to its business. However, the firm said investors have been slow in grasping the changes in how the company reports its quarterly numbers.

The firm attributed the negative investor reaction to their unwillingness to wait for the company to recognize profits, rather than to issues with its underlying business fundamentals.

BWS Financial clarified that the company's seasonal sell through in the second quarter converts much of the inventory it accumulated in anticipation of the Fall semester rush, into cash to pay off its debts.

The firm also said its earnings and cash flow numbers for Barnes & Noble Education do not change much after the FQ1 results.

"The sell-off is creating a buying opportunity in the stock as investors try to come to terms with the business model," the firm concluded.