Greenberg: Why Green Mountain Is Off My Watch List
SAN DIEGO (TheStreet) -- When we launch the Reality Check newsletter soon, it will have a Watch List of stocks I pay attention to. Each will have a flag -- red, yellow and, yes, if I feel so inclined, green.
Green Mountain (GMCR - Get Report) was on the mock-up list, but I have to take it off for a simple reason: After its latest 1-day jaw-dropping run, which makes me look like the ultimate chump, I believe it is currently uninvestable. It could as well go to $150 -- at least one analyst's target -- as it could go to $50. It is now a story stock, which means it will be traded up, down and sideways from here to there, wherever there is.
Trouble is, as I argue with myself, the risk is as high and perhaps higher than it has ever been. Even with Coca-Cola (KO - Get Report) taking a 10% stake, every key metric for Green Mountain is going in the wrong direction.
Reality: Recent quarters for the existing company have been awful. For all but traders and speculators, as is often with cult stocks, the risk of owning Green Mountain is as high as the risk of not owning. (I would actually put the risk a little more toward owners because, with many short-sellers likely squeezed out, the chance of a short squeeze has ended and any disappointment could cause the stock to fall in a vacuum).
The future of Green Mountain is now hinged, almost completely -- not on the company's new Keurig 2.0 coffee machine, which was the story a quarter ago -- but on its new single-serve cold drink machine (which, by the way, is non-exclusive, which means the company may announce more deals) and the hope/hype that Coke or someone else will buy the whole company.
What's clear, however, is that the cold drink machine is still under development (why else would its rollout be one-to-two years out?). And it's unclear how technologically complicated it is, how it will work in real-time and whether it will be a hit with consumers. (In technology they used to call products like that vaporware).
Pricing of the drink pods will be interesting to see, especially if, like coffee pods, they're priced considerably higher on a per-ounce basis than cans or bottles (in which case the market's thirst for pods over cans will be tested). And don't scoff at what I like to call the countertop issue. You can only put so many devices on your countertop until it is cluttered.
The product may be wildly successful, or, perhaps, a New Coke-like flop.Between here and there it's a story, and good luck trying to put a price to that. That's why, for the time being, Green Mountain is flagless. (Shameless self promotion: If you're interested in the newsletter, click here).
-- Written by Herb Greenberg in San Diego