Opinions seem to be divided on Green Mountain Coffee Roasters
) on Friday, with some analysts thinking of it as all but a lost
cause, and others hailing it an attractive proposition. That puts
the company in an interesting position, but let's looks at the
Green Mountain saw its stock shed roughly half of its value on
Thursday. No matter how you want to swing it, that's a hugely
significant loss that can be largely put down to the fact that
the company cut its outlook, badly missed estimates and, as a
result, lost the confidence of Wall Street. At the time of
writing, it's tough to envisage how it will get that confidence
back in the short term. GMCR fell 40% to $29.65 on Thursday.
Hedge fund manager David Einhorn, among others, has been
saying for months that GMCR has been inflating sales, and that
the company's high growth days are over. With short sellers
questioning Green Mountain's practices, the evidence is pretty
damning for the company. Some analysts are even saying that the
new results mark the beginning of the end.
GMCR spokeswoman Suzanne DuLong said in a statement that, "As
noted in our Annual Report on Form 10-K for our fiscal year ended
September 24, 2011, our independent registered public accountants
gave us a clean opinion. For the last two quarters, they have
done their review and we continue to comply with generally
accepted accounting principles."
That's great, but the soothing words have nothing to appease
Wall Street, who continue to short the company.
Wall Street Journal
listed GMCR as one of its "most attractive stocks" on Friday,
saying that the company reported net sales for 2Q12 increasing
37% to $885.1 million, from sales of $647.7 million in the
The report also pointed out that "abnormal trading volume of
Green Mountain Coffee was found on May 3, reaching 87.19 million
shares, 16 times heavier than usual day trading…are insiders
starting to take huge profits by selling shares or exercising
stock options? Academic studies have shown that insiders
traditionally make higher investment returns than ordinary
investors. Want to find out how they do it?"
Einhorn infamously released a detailed report on GMCR back in
October, basically tearing the company to shreds. The company's
new earnings report and outlook, regardless of how "attractive"
it looks to the Wall Street Journal, would seem to validate
everything that Einhorn said back then.
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