Green Mountain (GMCR) shares are trading below $20 this morning after brokerage firm Stifel Nicolaus cut the company's full-year earnings estimate by about 20%; the volatile stock this week has given up all of the 20 percent gain it managed in the two weeks previous.
Stifel analyst Mark Astrachan cut the fiscal 2013 earnings estimate for Green Mountain to $1.80 per share, down from $2.27, a 20 percent slashing. According to Thomson Reuters, analysts on average were expecting earnings of $3.05 per share for fiscal 2013. He also put the price target of the stock at $14, which is $5 and change below what it's trading at this morning.
"K-Cup pricing has decelerated in recent months and we anticipate it will worsen due mainly to increased competition stemming from the September 2012 patent loss and to a lesser extent lower coffee prices," Astrachan wrote in his note.
Astrachan is a longtime GMCR bear who put his first sell rating on the stock back in 2009 -- even before David Einhorn's infamous presentation that highly criticized the company's business model, transparency and accounting. Investors listening to Astrachan back then would have lost out on a great deal of profit, as the stock was only at $10 and eventually made its way up to a high of $115 back in September 2011.
But since then the stock has plunged more than 80 percent amid concern about slowing growth, slumping sales and increased competition in the K-cup space, especially considering a looming expiration of GMCR's patents that could give competitors a huge advantage. The company also continues to face criticism over its lack of transparency and ability to properly forecast sales.
Back in May, following its disappointing earnings report, the company -- which holds a massive 70% share of the single-cup market -- seemed puzzled as to why its sales were slumping. Everything from the unseasonably warm winter to rising prices to changing customer purchasing patterns were cited as possible culprits, and CEO Larry Blanford stated, "We have a number of efforts underway to really understand the overall portion pack demand." The fact that there isn't a concrete understanding of how its own business runs has remained a concern to investors.
Its 20 percent rise over the past two weeks seemed to have no clear catalyst; the stock does have a short interest of about 20 percent, and some analysts have suggested that it may have been due to short-covering.
We'll will get more of the Green Mountain view with the company reports earnings in a few weeks.
Starbucks (SBUX) -- which announced earlier this year that it would enter the single-serve market with its own brewing machine, Verismo -- is trading slightly up this morning and has seen gains of around 17 percent for the year.
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