Barnes & Noble (BKS) downgraded to sell from neutral at Goldman Sachs based on recent outperformance in share price and expected estimate cuts in weakening environment. Price target trimmed to $24 from $28.

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Barnes & Noble (BKS) was downgraded from Neutral to Underweight, JP Morgan said. Second downgrade in a month, as 2008 estimates will likely have to come down much further from current levels, led by lower same-store sales.

Deutsche Bank said it is cutting its full-year estimates on BKS by 9 cents to $1.81 a share as FY08 plan disappoints. Maintained Hold rating.

Educational

Barnes & Noble (BKS) was downgraded from Overweight to Neutral, JP Morgan said. Stock is up 23.6% since Jan. 15, as negative holiday sales could be the beginning of a difficult 2008.

Barnes & Noble's founder and chairman, Leonard Riggio, increased his stake to 15.8 million shares (24.4%) from the 15.3 million (22.9%) reported as of March 31. Riggio, the company's largest shareholder, said that he intends to purchase additional shares from time to time.

But, let's get to why Barnes & Noble made the cut into today's 'Insider Purchases and Share Buyback Portfolio.' Leonard Riggio, the company's chairman, continues to buy his company's shares. He disclosed on Friday evening a purchase of 300,000 shares at $38.02, bringing his stake to 13,364,597 shares, or more than 20% of company's total outstanding shares. Only a month prior to that purchase, on 9/11, he bought 100,000 shares at $32.95 apiece. And almost exactly one month earlier, on 8/10, he purchased another 100,000 shares at $32.64 a share.

9/25/07 $34.82

On Monday, September 11th, Director Leonard Riggio spent $3,295,000 buying 100,000 shares of BKS at $32.95 a piece. And almost exactly one month earlier, on August 10th, he purchased another 100,000 shares at $32.64 a piece worth $3,264,000. This brings his total holdings to 13,064,597 shares, or 20% of the company’s total outstanding.

It is very interesting that he bought shares on those two particular dates. September 11th and August 10th are the only two dates since March of 2005 that the stock price has dipped into the $32 range. By spending $6.5 million on BKS stock in one month, Mr. Riggio is telling us that Barnes and Noble at $32 is way too cheap in his mond, and we should take advantage of the buying opportunity.

A report by J.P. Morgan insists that we should follow the leader and buy when Len Riggio is buying. Historically Len's purchases have been well timed. Of his last five open market transactions, the stock has rallied 32% on average. And, naturally, when he sells, the stock has underperformed. His back to back purchases are a signal the stock remains undervalued.

J.P. Morgan has an outperform rating on BKS and set a modest price target of $35. They said, "In today's challenging consumer and retail market, we continue to prefer best of breed business models like Barnes and Noble." J.P. Morgan is also impressed by BKS's clean and cash-rich balance sheet. Moreover, at 14 times 2008 EPS, downside from current levels is limited. Achieving the company’s second half 2007 EPS forecasts and continued merger speculation may also prove to be catalysts. J.P. Morgan reiterates, "The rule of thumb is follow the leader."

After physically visiting many of these stores, I see a large potential for slip and fall liabilities. To fully take advantage of discounts, memberships cost $25 per year while other stores like Borders offer free memberships. Borders offers better prices and plenty of coupons. In terms of investor point of view versus the customer point of view, I'd go with Amazon.