Barnes & Noble shares up on upgrade

NEW YORK—Book seller Barnes & Noble Inc. could benefit from weakness at rival Borders Group Inc., an analyst said Monday, and upgraded the stock based on its lower share price.

Barnes & Noble sharesrose $2.06, or 13.5 percent, to $17.38. The stock has traded between $10.77 and $34.60 over the next 52 weeks.

Goldman Sachs analyst Matthew J. Fassler said in a note to investors that "ongoing challenges" at Borders -- which said Monday sales during the nine-week holiday period fell nearly 12 percent and replaced its chief executive -- could benefit Barnes & Noble.

He upgraded the company to "Neutral" from "Sell," mainly due to its stock price. The stock is down 42 percent since Oct. 1, and is down 34 percent since Goldman Sachs rated it "Sell" on Oct. 13.

Fassler also said that activist investor involvement might also make a difference for Barnes & Noble. Last week business magnate Ron Burkle purchased an 8.3 percent stake in the company.

While the move "reinforces the notion of value," Fassler said prior activist involvement did not make a difference in terms of the New York company's strategy or stock price.

Traditional book sellers are suffering due to heightened competition from discounters and online retailers such as Amazon.com, along with a weak retail environment overall.