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.
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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Green Mountain Coffee Roasters is a Motley Fool Rule Breakers recommendation. Starbucks is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.
Longtime Fool contributor Rick Munarriz can actually walk to three Starbucks from his home, but he's still not much of a coffee sipper. He's had a Keurig brewer in his home since Christmas of 2007. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.