Barnes & Noble (BKS) is in the direct path of one of the largest, highest momentum and most successful retailers in history: Amazon.com (AMZN). Whether it's price, convenience or almost any other metric, Amazon is crushing its competition and aggressively taking market share.
The consumer today is very price sensitive and Amazon is one of the largest discount retailers on earth, with an incredible assortment of offerings. Barnes & Noble is neither a price or category leader. And to make this already difficult situation for the retailer worse, Amazon's Kindle is continually being upgraded and becoming steadily more popular.
In addition, short interest as a percentage of float on BKS is almost 35%. This is an important level, because when stocks are this heavily shorted, the shorts are almost never wrong. To obtain a stock loan on something that is heavily shorted is expensive, and to be fundamentally wrong and have a huge short squeeze go against you can cause your investment business to fail.
BKS just rallied from $16 to $22. Trading at about 18 times earnings, it is ripe for a fall, so look at BKS put options.
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