Keurig Green Mountain Inc (NASDAQ:GMCR) stock is fresh off a two-day, 12% implosion. The selloff was sparked by news that the company’s highly anticipated soda machine, the Kold, won’t fully roll out until the end of 2016.
Oh, and it’ll cost between $299 and $369, depending on the model.
Both the ridiculously high price point and the staggered, limited release came as shocks to GMCR stock owners. Very unpleasant shocks.
Investors assumed — rightly, in my view — that the Keurig Kold soda machine would give the company a new and lucrative vertical outside of coffee and tea brewers. Instead, the Kold is already a botched operation, and it threatens to drag GMCR stock even lower.
Nice Idea, Poor Execution
I’m a long-term investor at heart. But when I see short-term problems start to repeat themselves, I get worried. And the short-term problems with GMCR stock have largely centered around subpar products and their devastating effects on financial results.
After second-quarter earnings per share and revenue — as well as forward-looking guidance — all whiffed on expectations earlier this month, I wrote about how GMCR stock was doomed to underperform in the years ahead. The main problem? Nobody’s crazy about their products anymore:
“The Wall Street Journal reports that the company’s own customers have taken to the websites of Wal-Mart Stores, Inc. (NYSE:WMT) and Amazon.com, Inc. (NASDAQ:AMZN) to complain about the Keurig 2.0, the company’s most recent brewer which was released last year.”
Well, the Keurig Kold isn’t faring much better than the Keurig 2.0, and it hasn’t even hit the shelves yet. Personally I think the idea behind it is pretty sound: the soda, juice, and tea brewer was meant to compete against Sodastream International Ltd (NASDAQ:SODA) for the shelf space of consumers.
The Kold was even more promising for GMCR investors because both The Coca-Cola Co (NYSE:KO) and Dr Pepper Snapple Group Inc. (NYSE:DPS) teamed with Keurig to work on the new project. KO, after all, has a financial interest in the Kold doing well because the soda giant owns 16% of outstanding GMCR stock.
But any perceived advantage over Sodastream isn’t so perceivable today, mainly because Sodastream has the Kold absolutely spanked on price, with price ranges between $79.99 and $199.99. The Keurig Kold’s online-only fall release further decreases the chance it’ll be a commercial success for GMCR.
And if there was still any speculation over a possible GMCR buyout at the hands of Coca-Cola, you can forget about it.
Not only did the Kold cause Keurig Green Mountain stock to selloff, it also precipitated a number of analysts to lower their price targets and at least two separate potential class-action lawsuits on behalf of investors.
As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.
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