Piper Jaffray Raises Its PT On Green Mountain Coffee To $46

Green Mountain Coffee

remains one of Piper's highest conviction recommendations. Green Mountain reported Dec-quarter sales/EPS well above expectations. Guidance was also impressive as management now expects top-line growth near 80% including the Van Houtte acquisition. Management announced a new brewer technology is in development that will contain new patents that extend to 2021. The quarter did include one week from the Van Houtte acquisition. The company shipped 2.2M new brewers during the quarter. System-wide K-Cup revenues were up 89% Y/Y at $157M. Gross margins were down 260bps due to higher brewer warranty expense, slightly higher returns and higher coffee costs. The company is hedged on coffee costs for 6-9 months. Management is committed to increasing price to offset any material changes to green coffee bean costs in the future. Piper Jaffray continues to recommend shares of GMCR as one of its top investment ideas. Green Mountain's business remains in the very early innings of its growth cycle and it expects strong earnings growth during the next three year period. Earnings are projected to grow 86% this year and another 42% next year. The stock remains undervalued in Piper's view. Piper has increased its price target to $46 and reiterates its Overweight rating. GMCR is trading higher at $38.88