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.

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