Green Mountain Shares Plunged: 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 single-serve brewer maker Green Mountain Coffee Roasters (Nasdaq: GMCR  ) got roasted 38% on Thursday after its fourth-quarter revenue fell short of Wall Street expectations.  

So what: While Green Mountain's profits nearly tripled, a miss on the top-line -- $712 million versus the consensus of $760.5 million -- is triggering fears that the recent short argument from hedge fund manager David Einhorn actually holds water. Green Mountain naturally tried to reassure Wall Street that the miss had nothing to do with the accounting issues brought up by Einhorn (slow wholesale orders were blamed for the shortfall), but it's obvious that investors remain seriously on edge.

Now what: Expect the impassioned tug-of-war to continue. "Ultimately, our best response is continuing to run our business with the utmost of integrity, focusing on driving a sustainable and successful business model," said CEO Larry Blanford. Unfortunately, given all the new fears regarding transparency, not to mention the stock's still-lofty price multiples, management will have a much tougher time impressing Wall Street going forward.

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. Motley Fool newsletter services have recommended buying shares of Green Mountain. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On November 11, 2011, at 4:07 PM, chadscards1274 wrote:

    Brian, one problem with the comments, "...not to mention the stock's still lofty price multiples..." Hmm...interesting at forward projections GMCR has a P/E of about 17, just the other day I read another MF article saying that MCD looked tempting at 17 times forward earnings. I understand that MCD has a lot longer track record, but HOW could anyone think that a company expected to grow at 10% selling at 17 times earnings is "tempting" and a company expected to grow at 20+% also selling at 17 times earnings is "lofty". Just because a stock used to sell at lofty multiples doesn't mean the stock gets this label permanently. Massive over-reaction to the GMCR earnings in light of full year estimates being reconfirmed for 2012.

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