J.P. Morgan Upgrades Barnes & Noble to ‘Neutral’

Portland, Ore. J.P. Morgan analysts, seeing opportunity for Barnes & Noble Inc. amid the tumult in bookselling, on Friday upgraded their rating on the company to "neutral."

Barnes & Noble earlier this month said it cut 100 jobs at its corporate headquarters and said its holiday season same-store sales fell 7.7%, while total sales fell 5.2% as consumers cut back on discretionary spending.

But J.P. Morgan analysts said the company's debt-free and cash-heavy position and emerging opportunities to capture marketshare give Barnes & Noble a glimmer of hope. They also characterized the holiday sales as "better than feared."

The analysts said in their note that bookselling remains a fundamentally challenged industry as consumers limit discretionary spending and traditional booksellers cede market share to other channels, such as Amazon. But they upgraded Barnes & Noble from "underweight" to "neutral."

J.P. Morgan wrote that the company's clean balance sheet will help it weather softness in the market and capitalize on strategic investments if opportunities arise.