As previously reported, Craig-Hallum downgraded Barnes & Noble Education to Hold from Buy with a price target of $1.25, down from $3, following a Department of Education proposal that could restrict colleges from bundling tuition with other fees, including textbooks. As it stands now, it appears that Barnes & Noble Education’s First Day Complete program would be substantially curtailed if the current proposal were enacted. At first glance, Craig-Hallum is inclined to think that such a proposal is unlikely to be enacted given that the primary reason schools sign up for First Day Complete is to save students money and level the playing field for low-income students. Yet no matter how the issue is ultimately resolved, it is likely to be a cloud over the stock for months or quarters to come, the firm says. Further, Craig-Hallum believes the DOE proposal could have a negative effect on the company’s ongoing efforts to refinance its credit facility, regardless of how the proposed regulations ultimately play out.
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