Shares of Keurig Green Mountain were percolating on Friday thanks to a deal with Kraft Foods. But while the stock has been on fire for the last couple of years, could investors get roasted in the months ahead?
Though Keurig Green Mountain’s stock is up over 77 percent year-to-date – and has more than quintupled in the last two years – Chad Morganlander, portfolio manager at Stifel Nicolaus Washington Crossing Advisors, is not warm on the stock.
“We at Stifel have a hold recommendation on it,” Morganlander said. Stifel Nicolaus makes a market in Keurig Green Mountain’s stock.
“As a value manager, I believe that this stock is somewhat frothy,” said Morganlander, noting that the stock trades around 34 times its 2015 expected earnings.
Morganlander is also wary on the company itself. “The business model is somewhat sketchy here when it comes to pricing,” he said. “There are competitive issues that they will have in the coming years.”
Keurig Green Mountain may not be the best investment idea, according Morganlander. “You want to be somewhat more pragmatic about investing in it,” he said. “This is bubblicious to me. Stay away.”
Steven Pytlar, chief equity strategist at Prime Executions, is more optimistic on Keurig Green Mountain based on the technicals.
“It does look very good on the charts, actually,” he said. “Since about the end of 2013, we’ve seen a number of higher lows develop. And what that means is that the stock is being revalued higher. The market is rewarding that value and paying higher prices.”
Keurig Green Mountain’s breakout above $124 per share on Friday was significant, according to Pytlar. “Since February, people weren’t willing to pay more than $124,” “In technical terms, that’s usually a very bullish indication. It usually means there’s plenty of more upside, and we think that the stock can continue to run.”
To see the full discussion on Keurig Green Mountain, with Pytlar on the technicals and Morganlander on the fundamentals, watch the above video.