you might not like it but JVA won't be able to capitalize on ANY movement in the coffee price - they had some cheap inventory when prices went up but guess what happened ? Their customers simply refused to buy and they actually had to offer their stockpile at DISCOUNTED prices to get at least some inventory sold. The cheap inventory will soon be sold out and they will have to buy at market prices again. The company has consistently shown that it is not in a position to deliver sustained profits or even successfully ride the coffee market waves. It is just a shame.
I read yesterday that their best estimates now are for a 25% shortfall in Brazil production this year, but it's hard to pinpoint because not all areas were affected similarly. The harvest is still in full swing. My view hasn't changed. There's not a lot of information coming out of the company so there's really no basis to change my mind. Generally, I expect sales to increase this quarter since the majors held off on buying in Q2 due to very volatile and high coffee prices. They will have to replenish their inventories at some point. I expect the higher sales to be offset by a possible hedging loss since JVA bought about 3 million pounds of coffee around $1.90 during Q2.
This quarter is an easy comparison year-over-year since they had a $2.1 million loss Q3 a year ago. If JVA can maintain a profit similar to the last 2 quarters, the P/E will instantly drop to around 10 after Q3 results and potentially lower than that during Q4.
This selloff is ridiculous. JVA is very oversold right now. I am convinced today's drop was due to a panicked investor cashing out instantly and using that money to bet against a potential terrorist attack the instant he heard about it. People still remember what happened to the markets after 9/11 and this trader made a very rash and sudden move based on a headline without knowing the details. Unfortunately, for JVA that doesn't mean an instant reversal is imminent. We will have to wait until August 15th to see earnings. It would be nice to hear some communication from the Gordons prior to that.