What has been bothering me about that terrible last quarter conference call...
Things have not been going so well for Green Mountain Coffee (NASDAQ: GMCR) lately, and it's losing the taste for profits. There are many reasons for the decline in profits, including patent expiration, terrible promotions, and new products that just aren't taking off as they should be. Despite these problems Green Mountain Coffee's share price still wants to edge higher, going from $45 a share in early February to where it is now at $54 a share in March. So what is causing this rise in stock price? Can it be justified considering all the problems the company faces? Let's take a close look at the financials and competitors and see just how much value Green Mountain Coffee can generate for investors.
Patent Expiration is a Drag
As of September 2012 the patents on the K-cup expired, and this didn't seem to help the bottom line for Green Mountain Coffee. As we know from other corporations, patent expiration is never fun to deal with. There are many competitors who are launching their own K-cup products, and the sad part is that Green Mountain Coffee receives no royalty payments from these products. The patent expiration kind of forced the company to start doing outrageous promotions just to keep customers buying its K-cup products. One promotion was for an online coupon that allowed customers to take $10 off for any products purchased that were $10 or more. In essence the company was giving away coffee for free just to show more sales and possibly to bring new customers to its brand of products.
New Product to the Rescue
So with the patent expiration problem and having to do a promotion that causes losses in revenue, what can be added to the pipeline of products that will help turn the company around. Green Mountain Coffee has now unveiled the new "Vue V500 Brewing system." This new product is added to the list of other Kuerig Vue products that combines the Kuerig's single serve abi
Chart says that stock is hugging the upper Bollinger and volume is drying up... average is 4.5 m shares per day now down to less than 2 m. Any chartist will tell you that is "thin ice" btw - I am long GMRC at the moment but have been unloading calls on the run up. I anticipate a round of profit taking and shorting on the way down sometime soon and I will probably sell some bear call spreads soon, before getting net ∆ +ve again... WHAT DOES THE CHART TELL YOU, oh wise one?