Why This 1 Coffee Stock Crashed Hard in 2012

Green Mountain Coffee Roasters (Nasdaq: GMCR  ) is the investing Icarus of the last 12 months. Once a multibagger stock, Green Mountain couldn't maintain its lofty growth multiples and has crashed down into value stock territory. A combination of factors including slowing growth, mounting inventory, questionable management missteps, and very public short calls have all contributed to depress shares to less than 20% of their 52-week highs. Green Mountain's slide bears more than a passing resemblance to Krispy Kreme's (NYSE: KKD  ) similarly publicized fall from grace. Both stocks became Wall Street favorites and couldn't maintain the growth commensurate with their multiple expansion after running up in price. Krispy Kreme became short-term focused with rapid expansion and pushing equipment on franchisees, and there is a growing belief that Green Mountain has done the same thing via channel stuffing and aggressive accounting.

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Austin Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services recommend Green Mountain Coffee Roasters and Starbucks. 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 Motley Fool has a disclosure policy.


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  • Report this Comment On July 03, 2012, at 4:51 PM, mikecart1 wrote:

    Oh this was about GMCR? I thought it was about Starbucks lol (jk). GMCR has a great plan or at least had. What they failed on is the extras people need to buy in order to enjoy their coffee. The machine is a set off. People without the machine would rather just use a traditional $10 coffee maker that can make coffee at a level of 90 (if 100 is used for GMCR). Also GMCR needs to reduce the price of the coffee product. You can get a bag of Starbucks or any other top brand for far cheaper than the individual K-Cups. Not sure if it is markups for profits and don't really care. When I drink coffee, I use the instant coffee from Nestle. For about $3 for a box of 20, you can't really beat that.

  • Report this Comment On July 05, 2012, at 12:38 PM, whyaduck1128 wrote:

    This isn't much of an article. One paragraph tells us things we knew long ago, the other is the usual pitch.

  • Report this Comment On July 12, 2012, at 11:14 AM, plange01 wrote:

    another month and coffee sales start to pick up you don't want to buy these stocks in october!

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