Barnes & Noble Education Looking To Read Positive Business Model Impacts, Says Analyst

  • Needham analyst Ryan MacDonald reiterated a Buy rating on the shares of Barnes & Noble Education Inc BNED with a price target of $4.
  • BNED's 3QFY23 revenue of $447.1 million came in well above the analyst's $406.0 million estimate, while adjusted EBITDA of $13.5 million came in below the analyst's $6.4 million estimate.
  • Total revenue grew 11.0% Y/Y, with the Retail segment increasing 12.4% Y/Y and the Wholesale segment increasing 5.2% Y/Y, partially offset by (4.5%) Y/Y declines in DSS.
  • The analyst had hoped for upside to FY23 numbers, but was more inclined by the updates around accelerated FDC conversion.
  • BNED plans to convert all existing customers in either Fall '23 or Fall '24, which will fundamentally improve the margin profile of the business.
  • Once converted, this existing learner base could represent an annual revenue opportunity of $1.4 billion, which grows to $5.5 billion as BNED continues to pursue the remaining 12mm undergrad students they do not reach today, the analyst added.
  • Coupled with 35% gross margins, the analyst sees the potential for significant adj. EBITDA margin expansion once the transition is complete.
  • The analyst remarked that the DSS segment prioritizes profitable growth, which is likely to be enhanced by integrations with OpenAI.
  • Price Action: BNED shares are trading higher by 8.14% at $1.86 on the last check Friday.
  • Photo Via Company
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