Green Mountain Coffee Roasters'
Analysts expect its revenues to increase by 50%, with EPS set to grow by a pretty impressive 33%. However, one thing that has truly made this stock stand out is its roller-coaster ride in the stock market. The stock hit an all-time high of $115.98 last year but since then has fallen to the mid-40s. So, what's the reason for the bearishness surrounding the stock? Was Green Mountain's growth just a fluke, or can it prove us wrong with its next quarterly report?
However, although it was feared that Starbucks' brewer, christened the Verismo, would grind away at Green Mountain's leading market share, Starbucks is looking to build on its relationship with Green Mountain as well. The two are looking to increase their partnership through which Starbucks will sell its single-serve coffees for the Green Mountain Vue brewer. Whatever the case may be, it doesn't change the fact that Starbucks will still enter the single-serve market, even though Starbucks claims that Verismo is a high-pressure brewer, compared with Green Mountain's low-pressure Keurig brewer.
So the threat may not be real, as Starbucks CEO Howard Schultz says the Verismo is intended to directly compete with Nestle's coffee machine. But it's still a factor that can't be ignored.
Even if we partly discount the Starbucks factor, what's really worrying is that Green Mountain's K-Cup patents are set to expire in a few months.
The good thing for Green Mountain at the moment is that it has contracts in place with the likes of Starbucks and Caribou Coffee
One thing that might work in its favor is Green Mountain's new high-end brewer, the Vue. But then again, whether Vue can enjoy the same level of success as the Keurig brewer is something that remains to be seen. It's more expensive and relies on a new, less used pod design.
Are these profits real?
Although Green Mountain has been raking in profits, its free cash flow has been in the red for the past five years.
Fears of falling revenue, increasing competition, and negative free cash flow don't really make for the best read. Green Mountain certainly has a lot to prove, though maybe it can prove its doubters wrong with its upcoming quarterly results.
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Fool contributor Shubh Datta doesn't own shares in the companies listed above. The Motley Fool owns shares of Starbucks and Apple. Motley Fool newsletter services have recommended buying shares of Green Mountain Coffee Roasters, Applem and Starbucks, creating a lurking gator position in Green Mountain Coffee Roasters, writing covered calls on Starbucks, and creating a bull call spread on Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.