Thursday, March 08, 2007

Stifel Nicolaus upgrades Barnes & Noble (BKS) to Buy; Sees as Good Take-Private Candidate

Stifel Nicolaus upgrades Barnes & Noble Inc. (NYSE: BKS) from Hold to Buy with a $43 price target. Analyst David Schick said, "Monday's lower guidance, we believe, presented conservative case or "kitchen sink" to gross margin outlook. We do expect traction for GM will take fully into FY08. But BKS is cheapest company we cover on EV/EBITDA basis. We see BKS story intact: (a) solid cash flow generator and (b) good real estate and store productivity, including domestic SBUX. We think BKS could be a good take-private candidate in low-to mid-$40 range, and we think MBO is perhaps best option. Specifically, good real estate, entrepreneurial culture at BKS, and vagaries of book business relative to public companies make "go-private" transaction look good, in our view."

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