Options for Keurig Green Mountain (GMCR)
Click to Enlarge Famous for its K-Cups and easy-to-use single-serving coffee brewers, Keurig Green Mountain (GMCR) shocked Wall Street back in February when Coca-Cola (KO) announced a $1.2 billion investment in the company’s new Keurig Cold system. Wednesday’s Keurig earnings will have investors looking for progress on the new at-home carbonated beverage dispenser, as well as updates on launch dates for the Keurig 2.0, K-Cup pricing and the potential impact of rising coffee prices.
Overall, analysts are projecting a profit of 95 cents per share from Keurig, but EarningsWhisper.com places the whisper number 6 cents higher at $1.10 per share. Optimism is high within the brokerage community, as Keurig stock has attracted seven “buy” ratings, six “holds” and no “sell” ratings.
But the optimism stops with the Street. Currently, short interest totals 157 million shares, totaling 12.3% of GMCR’s total float (or shares available for public trading). And if these short sellers are worried, they don’t seem to be buying call options to hedge their positions; the May/June put/call open interest ratio for GMCR stock arrives at an elevated reading of 1.07.
Short-term pessimism appears warranted, with GMCR stock retracing most of the gains made following the KO investment news. Keurig has plunged from a high near $125 in February to hover just above potential support at $90, placing GMCR stock at oversold levels. Immediate overhead resistance rests at $95 and $100, while long-term support resides near $84 in the form of GMCR’s 200-day moving average.
Weekly May implieds are pricing in a potential post-earnings move of more than 10% for GMCR stock, placing the upper bound near technical resistance at $103, while the lower bound resides near technical support at $84.40.
Options trade: Those looking to position themselves ahead of GMCR earnings might want to consider siding with the brokerage community by entering a bull call spread. At last check, the monthly June $90/$100 bull call spread was offered at $4.95, or $495 per pair of contracts. Breakeven lies at $94.95, while a maximum profit of $5.05 is possible if GMCR stock closes at or above $100 when June options expire.