In this Market Foolery podcast segment, host Chris Hill and Motley Fool Asset Management's Bill Barker look at the latest readout from children's book giant Scholastic (NASDAQ: SCHL), which underperformed Wall Street's expectations with its earnings report last week. Publishing has been in a rough patch for a while, but Scholastic has done poorly overall even graded on that curve. Question is, what can the company do to turn things around?
A full transcript follows the video.
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This video was recorded on Sept. 21, 2017.
Chris Hill: Let's move on to Scholastic, the bookmaker that's having a tough day. By bookmaker, we mean, they actually make books. They're a publisher of books. They're not a bookmaker like ...
Bill Barker: A bookie.
Hill: A bookie. It's not Guys and Dolls. The first-quarter loss for Scholastic was bigger than Wall Street was expecting, and you've talked before about how the greatest thing in life, one of the greatest things in life, is to have an easy act to follow. In this case, Scholastic had a very tough comp. They had a very tough act to follow, because it was a year ago that they came out with Harry Potter and the Cursed Child, which they sold eleventy billion copies of.
Barker: Apparently, yes. Parts one and two. That is probably what they, as a stock, at least, are best known for, the excitement around Harry Potter publications. It hasn't really amounted -- this is very similar to the story of AMD, in this sense -- it's been a very volatile stock with an underlying business that has been much more stable, oftentimes unprofitably, than the excitement that's around, "Oh this Harry Potter book is going to turn it around! They're going to be able to take the profits from this book and turn it into more recurring revenue." It's not been a happy time for publishing over the last decade. That's no secret. But they've managed to underperform the publishing group over any relevant time period that you wish to choose. I don't have an explanation for how they're going to turn that around. They've already got all of the interesting names that you can think of in the children's publishing space, or just about all of them.
Hill: So the fact that the stock, at one point this morning, was down 10% or 11%, it's hitting a 52-week low, you don't look at that and think, "This might be a value play right here"?
Barker: No, I think it's more likely to be a value trap in that it looks possibly, 2018, another Harry Potter book coming out, supposedly. I read that somewhere. What's that book going to be?
Hill: I don't know.
Barker: You're more of an expert on this Harry Potter stuff than I am.
Hill: Yeah, I think the next one is Harry Potter and the Pot of Never-Ending Money. That's what it seems to be for J.K. Rowling.
Bill Barker has no position in any of the stocks mentioned. Chris Hill has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.