As the market rallied on Friday, Green Mountain Coffee Roasters (Nasdaq: GMCR ) went the other way. Shares of the company behind the Keurig single-cup brewer and the K-Cup portion pack ecosystem fell 7% as it tumbled into the teens.
You have to go back three summers to find the last time the java company has traded this low.
Stifel Nicolaus analyst Mark Astrachan put out some bleak profit targets for the company, slashing his estimates on fears that heightened competition, rampant K-Cup discounting, and coffee drinkers who fail to embrace the company's new Vue platform will sting the company's near-term performance.
He is lowering his profit forecasts for fiscal 2013 from $2.27 a share to $1.80. Making matters worse, he now sees the company posting net income of $1.64 a share in fiscal 2014.
In other words, instead of the healthy 31% bottom-line growth that analysts see the company earning, in projections calling for earnings of $3.10 a share in the new fiscal year starting in October, Astrachan sees profitability declining. He also now sees earnings slipping yet again the following fiscal year.
To be fair, Astrachan has been saying that Green Mountain has been surrendering market share since last summer, when he warned that the company's partnerships with Dunkin' Brands (Nasdaq: DNKN ) and Starbucks (Nasdaq: SBUX ) could be detrimental. His bearish tone was the right call, given the stock's nasty tumble, but fears of crumbling sales and profitability have failed to pan out.
We'll get a clearer snapshot when the company reports its latest quarterly results later this month. Wall Street is braced for flat earnings grown on a 22% uptick in sales.
Given the thick pessimism surrounding the stock and skeptical analysts who are mounting anecdotal evidence against Green Mountain's fortunes, the company had better realize that the most important conference call in its public life is about to happen.
It had also better make sure it shows up caffeinated.
Shares of Green Mountain have still handily beat the market since I originally recommended the java heavy to Rule Breakers subscribers three years ago. It's lost a lot of ground lately, but if you want to discover the newsletter service's next Rule-Breaking multibagger, a free report tells all. Check it out before it's gone.