Shares of Green Mountain Coffee Roasters
Unfortunately, the bounce has nothing to do with a quick resolution to the company's SEC woes. Green Mountain's caffeinated spurt is fueled by rumors that Nespresso parent Nestle (OTC BB: NSRGY.PK) is readying a buyout bid.
The acquisition would make perfect sense. Nestle is the world's largest food company, and the success of its Nespresso machines and capsule refills find it spitting out shots of espresso throughout Europe. Stateside has been a harder market for Nespresso to crack, as Green Mountain's Keurig is the single-cup brewer of choice for java junkies smitten by American-style coffee.
Rumors of a Nestle buyout have surfaced in the past, but -- for once -- Green Mountain is vulnerable.
Instead of chasing Green Mountain up a skyward trajectory, the stock has switched to decaf since the revenue recognition concerns were raised in a corporate filing late last month. Even if the irregularities prove minor, Green Mountain's credibility has been sucker-punched. It may take some time before it regains its momentum as a growth stock darling. An exit strategy -- if the premium is right -- isn't out of the question.
Nestle may have company if the buyout rumor is for real. Keurig's popularity is undeniable. Revenue soared 64% in its latest quarter. It has been buying up many of its largest K-Cup partners, easing concerns over upcoming patent expirations.
J.M. Smucker
We also can't dismiss Starbucks
Investors shouldn't buy Green Mountain solely for the sake of the buyout buzz. An acquisition makes sense, but it's purely speculative at this point.
Shareholders need to stay alert -- and caffeinated.
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