Green Mountain Coffee Roasters Falling (GMCR)

Shares of Green Mountain Coffee Roasters (NASDAQ: GMCR) have been under pressure throughout the day, falling 8.21% to $83.21 on heavy volume. On the day, 4.12 million shares have exchanged hands versus a daily average of just under 1 million. GMCR has been on fire recently, hitting a 52 week high of $99.61 before the rather severe correction that has materialized over the last several trading sessions. Over the last 5 days, the stock has lost 13.24% of its market cap.

Green Mountain Coffee Roasters (GMCR) was the best performing stock of the last decade, with most of the gains coming in the last couple of years. This appears to be a case of valuation becoming a bit stretched. The shares were downgraded at Bank of America (NYSE: BAC) earlier this week on these concerns. According to Yahoo! Finance, the stock is now trading at a forward P/E of just under 29, which is much more reasonable than when GMCR was flirting with $100.

Another factor to consider when evaluating the stock is the very large short interest, which is at around 20% of the float. At some point these shorts will need to cover, and this should result in a bounce in the price. GMCR reports earnings on April 28th, and this could provide a catalyst to turn around the near term downward price movement.