Why Green Mountain Coffee Roasters' Shares Jumped

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 coffee maker and premium coffee retailer Green Mountain Coffee Roasters (Nasdaq: GMCR  ) popped as much as 13% following optimistic notes from two brokerage firms.

So what: Earlier today, Lazard Capital initiated coverage on Green Mountain with a buy rating and a $39 price target. The covering analyst, Matthew DiFrisco, noted that while Green Mountain's growth rate is slowing from a hyper-growth rate, there's minimal downside in its share price. Similarly, analyst Anton Brenner at Roth Capital noted that the negativity surrounding the release of private-label K-Cups has been factored into the reduced share price already. Roth Capital maintained its buy rating on the stock and a $35 price target.

Now what: Even if we like the result of these analysts' comments, I can't help but point out -- yet again -- that one-day pops and drops from brokerage comments are rarely worth changing your investment thesis over.

What I can say about Green Mountain that does happen to coincide with both firms' analysis is that Green Mountain does appear cheap given the risks presented. As I noted in my roundtable discussion on Green Mountain with fellow Fools Alex Planes and Travis Hoium, the company has K-Cup partnerships with Starbucks (Nasdaq: SBUX  ) and Dunkin' Brands (Nasdaq: DNKN  ) which provide a steady source of growth. It will face private-label K-Cup competition from Kroger's (NYSE: KR  ) grocery stores this month and will contend with a coffee-making machine from Starbucks, the Verismo, at some point later this year, but it appears to have a strong enough brand presence and growth rate to easily justify its current valuation.

If you want the full scoop on Green Mountain Coffee Roasters and not just a day's worth of analyst noise, then get your copy of our latest premium research report on Green Mountain. This report will give you the skinny on the long-term opportunities and pitfalls that could move this stock, and comes complete with a full year of regular updates. Get this report by clicking here, and claim your investing edge.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Green Mountain Coffee Roasters and Starbucks. Motley Fool newsletter services have recommended buying shares of Green Mountain Coffee Roasters and Starbucks, as well as writing covered calls on Starbucks, writing naked calls on Dunkin' Brands, and creating a lurking gator position in Green Mountain Coffee Roasters. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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