Today Barron’s reported that GMCR may be too hot and investors should look closely at the company’s profits through purchases from royalty-paying licensees. A few weeks back I published my bearish bias contrary to what Zacks had (Aggressive Buy) and suggested two different ways to trade GMCR. With shares trading at almost 60 times earnings for the current fiscal year, investors should look closely at why earnings beat analyst forecasts by 40 percent while sales beat by only 8 percent, Barron’s said.
The earnings increase was driven by an 85 percent increase in royalties the company gets from other companies selling coffee in its proprietary single-serve cups, called K-Cups, Barron’s said.
GMCR will trade on post split (3 for 2) today. We’ll see if Barron’s profiling gives much needed correction to GMCR when it starts trading today; thus increasing my gains and probably for those who shared similar opinion.
Profitable Trading, OP
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