GMCR Is Awaiting an Overdue Oversold Bounce

Once a Wall Street darling, Keurig Green Mountain (GMCR) fell from grace in December when it became clear that consumers were not embracing the latest version of the company’s iconic single-cup coffeemaker.

GMCR Is Awaiting an Overdue Oversold BounceIn early May, the stock had shed a third of its market value ahead of the company’s May investor conference. Traders had gotten a bit icy on the hot side of the Keurig franchise, and management had been looking for ways to reinvigorate the product line and recover.

The May investor conference was to be the unveiling of a long-awaited “Keurig cold” drink maker.

But the Street’s reaction to the company’s new Keurig KOLD machines was again a bit icy. The shares sold off more than 8.5% the following day, eventually falling to a 52-week low of $82.42 just last week.

GMCR was due an oversold bounce before the big announcement and it’s even more overdue for one today. While the disappointment surrounding the shares and the new KOLD dispensers has certainly been extreme, I have to question whether this is really just a convenient hook for traders looking for an excuse to keep selling GMCR.

The analysts who saw the new product in action did not join the bear party and nobody has cut either price targets or EPS forecasts. From a fundamental perspective it’s like the unveiling never even happened, which tells me that far from being disastrous, the announcement simply mirrored what was already baked into Wall Street’s narrative for this company.

That being said, it’s starting to look like Keurig may be getting its friends on Wall Street to stand up and speak out. Morgan Stanley recently came out with a “bearish” report that still targets fair value of $130 for these shares — a solid 50% higher than current prices.

And with bears like that, who needs bulls, right? The analysts there are wild for the KOLD product.

This is the first shift in sentiment after a rough couple of weeks for these shares, but the conversation may be starting to change. I also noticed a solid 3% swing on 20% more volume than usual at the end of the last week, a signal to traders that the stock may be ready for that overdue oversold bounce.

The relative strength index (RSI) has remained stubbornly below the 30 line that connotes oversold conditions, and it’s worth nothing that previous lifts in late March and May took GMCR up 8%-9%.

Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader,Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network, and other media.

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