Green Mountain Coffee Roasters Shares Surge 41% on Starbucks Deal (GMCR, SBUX)

The number one stock of the past decade (+7,895.4%), Green Mountain Coffee Roasters GMCR, continued its upward trajectory today after it announced a deal with Starbucks SBUX.

The partnership will allow Starbucks and Tazo tea branded K-cup portion packs to be available for use with Green Mountains wildly popular Keurig single cup brewing system.

Green Mountain's Keurig is the dominant brand in single-serve coffee. Consumers have rapidly adopted its ease of use and convenience which ultimately seeded a market opportunity that Starbucks could not resist.

Several weeks ago, Starbucks CEO Howard Schultz hinted that a partnership was in the works when he stated that the Seattle-base company would be offering a new product “in the near future”. Today, the rumor was squashed.

Today, the rumor was squashed after it was announced that Starbucks would be a new partner for its single-cup brewing system. Green Mountain's stock advanced as high as 43%, to a historic high of $62.26. The growth stock, which was trading for $5.50 in October of 2008, has climbed approximately 1000% since then.

 Both companies will also begin to offer Starbucks K-Cup pods alongside Keurig machines at food, drug, mass, specialty, department and Starbucks stores.

The deal will certainly boost the sales for Keurig machines as CEO and President Howard Schultz stated that more than 80 percent of Starbucks customers do not yet own a Keurig single-cup brewing system.

As it stands today, the single-cup systems grow at approximately five million annually with annual single-cup coffee sales of $4 billion.

Last month our own Wyatt Investment Research's Chief Investment Strategist, Ian Wyatt, called for shares to rise from $37.95 to “above $45 within the next year as this growth stock expands organically and through synergistic acquisitions and continues its upward trajectory”.

Now the question for investors is if shares of Green Mountain are still trading at an attractive value.  I would be hesitant to take a position at this juncture for several reasons.

Typically when a company of Green Mountain Coffee size ($8.7 billion in market cap) jumps 40% in a day I tend to wait for a pullback before considering taking a position. After all, Green Mountain Coffee Roasters shares have increased 10-fold in the last three years. With the stock trading at 50 times earnings it would be prudent to give the stock time to pull back for a more reasonable entry price.

I will be waiting patiently on the sidelines.