Insider Selling Is Not To Blame For Barnes & Noble Education Price Drop
Barnes & Noble Education (NYSE: BNED) just saw its shares implode and we are here to tell you that insider trading is not the reason why. While insiders were selling the stock those sales were centered firmly in the 2nd quarter and have long since ceased. More recently, major shareholder and board member Zachery Levinick has been buying. Mr. Levinick made four purchases worth almost $740,000 which is no small amount. The purchases bring his ownership up to about 0.47% of the shares outstanding and insider ownership to nearly 4.0%.
Insidertrades.com indicates institutional buying has been strong this year regardless of the insider action. Institutions own 66.5% of the company and have been increasing their holdings over the past four quarters. One notable large institutional owner and buyer of the stock is Blackrock which holds about 11% of the company. No, the reason why Barnes & Noble Education shares imploded is because of results. Results that are not only impacted by COVID-related business declines but by the omnipresent supply chain headwinds affecting the broader economy.
Barnes & Noble Education Struggles With Conditions
Barnes & Noble Education did not have a terrible quarter given the current environment but it didn’t have a great one either. The results not only show a deep impact related to enrollment and on-campus living but also to supply chain headwinds that are not expected to end this quarter. Worse, the outlook for business is very shaky calling for a return to pre-COVID conditions by 2023 with the assumption that is even possible. The good news is that what business there is, is good and should improve, the question is by how much?
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The company’s FQ2 revenue came in at $626.98 million which is up 5.3% from last year but down 18.8% versus two years ago and 550 basis points shy of the consensus. Revenue was driven by a 13.2% increase in retail sales and a 39% increase in DSS that was offset by a 40% decline in wholesale revenue. The wholesale revenue decline is blamed on used textbook supply as well as shipping challenges for the same. As for retail sales, textbook sales were basically flat YOY which shows enrollment hasn’t changed much. The good news is that on-campus living is returning to a normalized state and provided a strong rush season. General merchandise sales, which includes all of the Greek and team/mascot paraphernalia, rose by 78% YOY.
Needless to say, rising costs related to deleveraging and supply chain issues cut into the bottom line results as well. The company reported $0.41 in GAAP EPS to miss the consensus by $0.17 or 29.3%.
“The Company expects non-GAAP adjusted EBITDA to approach annual pre-COVID levels in fiscal year 2023, based on an expectation that campuses will be able to resume on campus learning, events and sporting activities with substantially less-restrictive COVID-related policies and operating protocols next year, and that there are fewer negative impacts from the broader supply chain issues.”
The Technical Outlook: Barnes & Noble Education Enter Correction
Shares of Barnes & Noble Education fell nearly 20% on the Q3 news and outlook to extend the recent losing streak to well over 20% and enter correction territory. The stock is sitting above support in premarket action but there is no guarantee buyers will be waiting. There is a slightly high short interest of 5.35% so there might be some short-covering but don’t read too much into it. Any bounce at this level should be considered a Dead Cat Bounce until a bottom is formed and there is some positive change in the outlook.
Companies in This Article:
|Company||Current Price||Price Change||Dividend Yield||P/E Ratio||Consensus Rating||Consensus Price Target|
|Barnes & Noble Education (BNED)||$5.62||-2.1%||N/A||-2.48||Buy||$12.00|