Barnes & Noble Education, Inc. (BNED): A Bear Case Theory

We came across a bearish thesis on Barnes & Noble Education, Inc. (BNED) on Monopolistic Investor’s Substack by Antoni Nabzdyk. In this article, we will summarize the bears’ thesis on BNED. Barnes & Noble Education, Inc. (BNED)'s share was trading at $11.82 as of 4^th June.

Barnes & Noble Education (BNED) operates at the intersection of traditional academia and retail, providing textbooks—both digital and physical—while also managing campus bookstores across educational institutions. Its model, though well-entrenched within a regulated education system, faces mounting pressures from evolving technology and shifting student preferences.

While AI-powered learning alternatives like Duolingo pose a long-term threat, the structural inertia in education ensures textbooks remain mandatory for now. More pressing is the competitive threat from Amazon, which offers direct textbook purchases, eroding BNED’s intermediary role and highlighting the company’s lack of pricing power.

Students, constrained by affordability, routinely compare prices or opt for used books, which has led BNED to build a student trading platform, yet this only reinforces the commoditized nature of its core product.

BNED’s dependence on third-party suppliers adds vulnerability, as nearly 28% of its inventory is externally sourced. Despite these challenges, its access to the college demographic provides marketing partnerships with brands like DoorDash and Dell, and its campus stores benefit from sales of custom school merchandise and branded apparel. The company also generates revenue through NOOK e-readers, merchandise, Starbucks cafés, self-publishing, and memberships.

However, BNED remains financially weak: it has negative net margins, thin operating profits, and inconsistent revenue driven by academic cycles. While it maintains a positive net equity position, its debt load and structurally uncompetitive metrics underscore a business in decline. With stagnant projected growth and few signs of meaningful turnaround, BNED appears poorly positioned in an industry facing long-term disruption, making it an unattractive investment prospect.

We previously covered a bullish thesis on Barnes & Noble Education (BNED) by Catapult Capital on Substack in March 2024, which highlighted the transformative potential of Equitable Access programs, improving margins, and resolution of regulatory and debt overhangs. While the stock has appreciated by approximately 21% since then, Monopolistic Investor’s recent bearish take contrasts sharply, emphasizing BNED’s structural weaknesses, thin margins, and susceptibility to competition and disruption, raising doubts about the sustainability of its turnaround.

Barnes & Noble Education, Inc. (BNED) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 12 hedge fund portfolios held BNED at the end of the first quarter which was 17 in the previous quarter. While we acknowledge the risk and potential of BNED as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.