Green Mountain Shares Skyrocketed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Green Mountain Coffee Roasters (Nasdaq: GMCR  ) soared a whopping 40% in intraday trading Thursday after agreeing to sell Starbucks (Nasdaq: SBUX  ) brand coffee and Tazo teas for its Keurig single-cup brewing system this fall.

So what: Sales of Green Mountain's Keurig brewer have certainly been smoking, but the deal allows the company to attract even more new users with popular premium brands and better access through Starbucks' thousands of retail locations. For Starbucks, whose shares are also up nicely on the news, the partnership represents its latest push into the fast-growing $2 billion U.S. single-cup coffee market.

Now what: This single cup-pact is certainly good news for Green Mountain, but I'd stay on the sidelines at this point. Without any more details regarding the exact length and terms of the partnership, it's tough to tell whether today's staggering rally is justified. After all, with a stock that's blasting through its 52-week highs and a P/E sitting north of 110, the margin for error on Green Mountain seems particularly small.

Interested in more info on Green Mountain? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Green Mountain is a Motley Fool Rule Breakers pick, and Motley Fool Options has recommended buying puts on it. Motley Fool Alpha has opened a short position on Green Mountain. Starbucks is a selection of Stock Advisor, and the Fool owns shares of it. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.


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  • Report this Comment On March 10, 2011, at 6:02 PM, ozzfan1317 wrote:

    Why do people keep pricing stocks on a trailing basis? The market is forward thinking. If you look at the forward valuation its 35 far from outrageous even at this price.

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