What Does The Green Mountain/Starbucks Partnership Mean? (GMCR, SBUX, PEET)

The stock market plunged on Thursday, but it was a truly unbelievable day for one company, which has had its fair share of tremendous days. That company of course would be Green Mountain Coffee Roasters GMCR, which announced a partnership with Starbucks SBUX. The deal means that Starbucks will now be selling its world famous coffee and Tazo tea in Keurig's K-Cup portions.

This news has sent both company's stock prices skyrocketing, with GMCR shares surging more than 41% to a new all-time high of $61.66 and SBUX gaining 10% to hit a 52-week high of $37.97. The moves in the stock prices are particularly interesting, because this deal had been speculated about for a long time, but clearly investors were caught a bit flat-footed anyway.

While the partnership is likely going to be a boon for GMCR and SBUX, it looks like it will hurt Peet's Coffee & Tea PEET, which lost 11.5% on Thursday to $42.53. After the partnership was announced, an analyst at Janney Capital cut his rating on the shares to Sell, suggesting that there is now little chance of PEET signing its own K-Cup deal.

Starbucks has been indicating for some time that it will be entering the single serve market and CEO Howard Schultz told Fox Business Network just yesterday that it will "lead" when it does. While one could argue that today's development suggests that SBUX isn't exactly "leading," it may decide to develop its own single-cup brewing machine, which today's deal does not prevent the company from doing in the future. This announcement is certainly a start for the company. It also will be a tremendous near-term catalyst for Green Mountain.

Janney Capital analyst Mitch Pinheiro is estimating that Starbucks will help drive one million Keurig brewer sales in the first 12 months, resulting in at least $0.30 per share of earnings for Green Mountain on a full year basis. The momentum at GMCR has been absolutely tremendous over the last couple of years and Keurig model coffee makers are now becoming ubiquitous and the stock price is a testament to that.

GMCR was the best performing stock of the last decade, and has risen nearly 2,000% in the last five years, with most of those gains coming since the beginning of 2009. SBUX has also jumpstarted its once languishing share price, more than tripling from its 2009 lows. These will continue to be two companies to watch in the coming years, and more big gains could be in store as this latest development plays out.