After seeing its stock soar 30% higher last week, Green Mountain Coffee Roasters (GMCR.DL) seemed vulnerable for a pullback.
It didn't. Shares of the company behind the Keurig K-Cup brewers rose 3% today, caffeinated by a bullish analyst note.
Lazard Capital is raising its price target on the premium java specialist from $42 to $56, encouraged by the company's near-term growth prospects. The analyst thinks Green Mountain's projected growth of 15% to 20% in fiscal 2013 is conservative.
Green Mountain is trading at a reasonable 16 times trailing earnings and just 14 times the midpoint of its guidance for the new fiscal year. Starbucks (SBUX 0.29%) is fetching 24 times forward earnings, even though it's growing at a slower rate.
Starbucks has earned its market premium. It's a proven juggernaut. There are questions about Green Mountain's growth now that its K-Cup patents have run out, and skeptics are still dogging the company with accounting questions about the past. However, Green Mountain is still cheap.
Even so, it's not the cheapest java stock. Coffee Holding (JVA 15.48%), provider of premium branded and private-label coffee, is now fetching less than seven times this new fiscal year's projected profitability. That's a stark contrast to the forward earnings multiples in the 20s for Starbucks and Caribou Coffee (NASDAQ: CBOU). However, Coffee Holding is still largely seen as a commodity play, given the relatively obscure nature of its flagship brands.
Green Mountain, on the other hand, offers investors a chance to cash in on entire ecosystems. It's not just about the bean brands. Yes, the K-Cup patents have run out, but the company has fresh clocks ticking on the intellectual property behind its Keurig VUE system and its more recent Rivo partnership.
Shares of Green Mountain peaked two summers ago in the triple digits. The stock isn't heading back there anytime soon. It needs to replace question marks with exclamation points to make that happen. However, it's clear that the sell-off that took the stock all the way down to the high teens this summer was also overdone.
A near-term pullback in shares of Green Mountain wouldn't be a surprise, but last week's encouraging quarterly report suggests that a bullish long-term view is appropriate.
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There's a premium report on Green Mountain, exploring the Keurig champ's challenges and opportunities. A free year of updates is included, so click here to get up to speed.
