Investors may be bailing ahead of next week's K-Cup patent expirations, but some analysts are approaching Green Mountain Coffee Roasters (Nasdaq: GMCR) in a more favorable manner today.
Lazard Capital Markets initiated coverage of the company behind the Keurig single-cup brewing platform with a bullish buy rating this morning. Analyst Matthew DiFrisco sees favorable household penetration rates despite the incoming avalanche of third-party portion packs. He feels that Green Mountain can deliver double-digit growth on the top and bottom lines over the next "several" years.
You hear that, Green Mountain bears?
Roth Capital's Anton Brenner is also out with a note pointing out that the private-label competition won't be as troublesome for Green Mountain as the shorts think. He has a price target of $35, and that's actually even lower than DiFrisco's new $39 share price goal.
It's true that grocery stores have gone public with plans to offer their own K-Cups later this month. SUPERVALU (NYSE: SVU) became the latest party pooper, announcing this week that its upcoming Java Delight Single Serve UnCup coffee pods will work with Keurig brewers.
Thankfully, no company has had more time to prepare for the expiration of its K-Cup patents on Sept. 16 than Green Mountain itself.
Last year it inked multiyear deals with Starbucks (Nasdaq: SBUX) and Dunkin' Brands (Nasdaq: DNKN). It went on to acquire many of the more popular K-Cup coffee brands. It was able to put out a new brewing platform with a fresh clock on its portion packs.
There's also something to be said about the popularity of the brewers themselves. As supermarkets devote more shelf space to Keurig refills and prices likely head lower, it's easy to see a surge in demand for Keurig brewers. Green Mountain may not see the coffeemakers as profit centers, but it will give the company the perfect opportunity to establish direct relationships with java lovers through its online store.
Green Mountain was overvalued when it peaked last year. David Einhorn was right. However, as analysts begin to study the potential of the company continuing to grow in the new climate and finally delivering the positive cash flow that worrywarts have been lamenting the lack of, Green Mountain as a value play is the new brew.
Brew ha ha
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