Green Mountain Coffee Roasters (Nasdaq: GMCR) could use a wake-up call.
The Vermont-based single-serve coffee brewer fell 22.5% last week, capped by a whopping 15% one-day decline on Friday on news that rival Starbucks (Nasdaq: SBUX) will soon be jumping into the single-serve fray. Starbucks will introduce its own single-serve coffee brewing machine later this year.
Single-serve coffee is a market Green Mountain Coffee has dominated for years. But with the expiration of its single-serve packets later this year and now Starbucks’ impending move into the business, shares of GMCR have been tanking.
It wasn’t long ago that the stock was double what it is today. As recently as September, GMCR was trading at $111 a share. Today it’s less than half that, at $52.42 a share.
The big drop-off came in October, when renowned hedge fund manager David Einhorn announced at the Value Investing Congress in New York that he was short-selling Green Mountain Coffee Roasters. His rationale for doing so included the upcoming expiration of GMCR’s K-Cup packets, an ongoing SEC investigation into the company’s accounting practices, capital spending exceeding income, and the company’s Keurig brewers being overpriced.
Our own Ian Wyatt warned readers about Green Mountain’s looming stock struggles after hearing Einhorn’s pitch first-hand back in October.
“With the expiration of Green Mountain’s K-Cup packets, it was only a matter of time before a company like Starbucks jumped into the single-serve pool,” Ian says.
Starbucks’ challenger to the Keurig machine will be called the Verismo single-serve brewer. It’s slated to hit the shelves sometime around the holidays. Starbucks’ stock has climbed 7% since last Tuesday.