Credit Suisse upgraded Barnes & Noble Inc shares, citing benefits the top U.S. bookstore chain could reap from the woes faced by smaller rival Borders Group Inc , which is meeting with publishers this week to negotiate new payment terms.
Credit Suisse analyst Gary Balter said in a research note on Wednesday that if Borders ended up closing all of its stores, including about 500 superstores, that would ease pressure on Barnes & Noble.
Balter raised his rating to neutral from underperform and increased his target price to $16. Barnes & Noble shares were up 2.3 percent at $15.85 in early trading, while Borders gained 3.9 percent to 87 cents.
Barnes & Noble operates 717 namesake superstores and has won between 17 percent and 20 percent of the growing e-book market since the 2009 introduction of its Nook e-reader device.
Borders started its e-bookstore in July, but has not developed its own e-reader. It has only garnered a small share of the e-book market.
Balter said about 70 percent of the chains' stores overlap. Fewer Borders stores would ease pressure on Barnes & Noble, whose retail sales of paper books have fallen as readers migrate to e-books.
Barnes & Noble would take about 18 percent of Borders sales, bringing in an additional $400 million, if the rival chain were to close all of its stores, Balter estimated.
Borders shares fell as low as 83 cents on Tuesday, their lowest price since April 2009, and closed down 74 percent from their 52-week high last April. Sales at Borders superstores open at least a year fell by double-digit percentage rates in 2009 and 2008.
(Reporting by Phil Wahba; Editing by Lisa Von Ahn)