Green Mountain Coffee Roasters (GMCR) remains one of the most-attractive names in the realm of growth stocks. Bullish investors have been using the weakness to accumulate shares in recent sessions. It is a growth story we believe continues to have legs long term.
The company appears poised to ride some strong trends heading into the holiday season. Sales of its Keurig single-cup coffee makers have been solid all year and the Christmas season usually pumps up the results.
But Green Mountain will also benefit from the launch of K-Cup versions from two key brands, Dunkin' Donuts and Starbucks, this fall.
Analysts say Green Mountain will benefit from the advertising and promotion by both of these high-profile partners.
Company officials say the second leg of the value chain that is driving its rapid growth is the quality of the coffee it offers.
The Starbucks and Dunkin' Donuts brands add to that perception, but Green Mountain has its own brands and others that it has purchased over the years, plus other partners.
Some of those new products include Cafe Escapes, which is a line of cocoa and dairy products; and its Brewed Over Ice coffees and teas. This fall it will promote a new Hot Apple Cider offering and a coffee it is calling Barista Prima.
Green Mountain estimates that there are approximately 90 million households in the U.S. that have a coffee maker in the home and the Keurig is currently in 7 to 9 million of them.
We remain big fans of the Green Mountain story, with its razor and blade model.
The quality of the K-cup offerings is high and reasonably priced; certainly cheaper than grabbing a cup to go at a specialty coffee shop and often less waste with a pot of home brew. We continue to believe GMC! R has a long runway for growth.
The company just wrapped up its 2011 fiscal year and investors will be most keen to learn more about how the first quarter, which encompasses the holiday selling season, is shaping up.
GMCR is expected to more than double its revenue and profit for the final quarter and full year when it reports 2011 results.
The share traded to within a hair of $116, its high for the year, in mid-September before slumping to under $88 when the broader market retreated.
It's not a cheap stock, but given its growth potential we think it still worth accumulating, especially on any weakness.
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