Jim Cramer: Barnes & Noble, Nook and Amazon
“Barnes & Noble will indeed become a stock that can be owned for investing purposes,” said author, entrepreneur and stock-picker Jim Cramer, famous for his television show Mad Money, speaking at Digital Book World 2014 in New York.
Cramer believes that Barnes & Noble stock is undervalued. The premise is simple: Soon, there will be so few bookstores that anyone who wants to buy a book will have to go to Barnes & Noble — and Barnes & Noble bricks-and-mortar stores do fairly well.
The problems? Nook and time.
“If the Nook were shut, the stock would indeed thrive,” said Cramer.
The good news with Nook, according to Cramer, is that the worse it does, the better it is for Barnes & Noble.
“The worse the Nook performs, the less materially it could drag down results. The company loses so much money per device, the less they sell, the less money they lose,” he said.
The other problem is time.
“Barnes & Noble has to wait until there are no more bookstores left and it’s the only one,” said Cramer.
He speculated that Barnes & Noble needs to decide whether it wants to “go it alone” or partner with a deep-pocketed investor that “loves books” and “is willing to stick it out.”
As for Amazon, Cramer called it “the most overvalued stock in history” and like “modern art: it can’t be explained.”
He wondered, as many analysts have, why investors keep on pouring money into the company when it rarely shows any profits despite multi-billion-dollar revenues.
At the same time, because of the tremendous value that the company has created in technology and gathering customers, Cramer called Amazon a “cult, but a cult that everyone should join.”
All that said, nothing is certain when it comes to investors and Wall Street.
“On Wall Street, you’re never wrong, you’re just early,” said Cramer.