Green Mountain Coffee Roasters (GMCR +0.00%) is riding high these days as it heads into tomorrow's quarterly report.
Shares of the company behind the Keurig single-cup coffee brewing system hit a fresh 52-week high on Friday, and even a bearish analyst is tempering his near-term pessimism on the stock.
Stifel Nicolaus analyst Mark Astrachan raised his profit targets on Green Mountain yesterday, but he's sticking with his sell rating.
Wall Street sees Green Mountain's earnings and revenue climbing 14% and 16%, respectively, for its fiscal third quarter that ended in March, but Astrachan sees a profit of $0.80 a share, 25% ahead of what the brew master earned a year earlier.
Astrachan's argument is that lower coffee costs will result in widening margins at Green Mountain. He's also boosting his bottom-line target for all of fiscal 2013 from $2.80 a s hare to $2.95 a share. Wall Street's average is just $2.84 a share.
Naturally, one wouldn't expect a bearish analyst to be perched above his peers, and the disparity here comes as we look out to fiscal 2014. Astrachan sees net income sliding to $2.83 a share, up from his earlier $2.71 a share forecast but still well below the consensus calling for continuing bottom-line growth at Green Mountain.
Astrachan feels that the market penetration for single-serve java brewers is already far enough along enough where new brewer and K-Cup sales growth will slow. Don't tell that to Starbucks (SBUX +2.73%), which entered this market last year with its espresso-centric Verismo platform. Like most skeptics, he also fears what will happen to the company now that K-Cup patent expirations open up the refill market to third parties. Green Mountain may be the undisputed leader in this niche, but its brand is certainly not as established as Starbucks' when it comes to premium coffee.
Green Mountain's been a wild ride lately. It's been a big winner for bulls in recent months as the stock has more than tripled since bottoming out this past summer. However, it was the bears that won convincingly after the stock peaked in the triple digits the summer before.
The next tug should come tomorrow afternoon after Green Mountain pours out its fiscal second-quarter financials.
