Green Mountain Coffee Roasters (NASDAQ: GMCR, Stock Forum) offers about 180 varieties of coffee, cocoa, and tea, which it sells to wholesale customers including supermarkets, convenience stores, resorts, and office-delivery services, according to Hoover’s. Among its customers are Exxon Mobil's convenience stores and McDonald's restaurants. Green Mountain's coffee is sold under the Newman's Own Organics brand, as well as its namesake Green Mountain Coffee and the Tully's label. The company also sells the Keurig single-cup brewing systems for office and home use.
On July 30, the company posted earnings that surpassed the consensus estimate. The coffee giant banked a profit of 36 cents per share, compared to its year-ago results of 17 cents per share. Meanwhile, the consensus estimate from analysts was a profit of 28 cents per share. Revenue came in at $190.51 million, which fell slightly short of the Street estimate for sales of $193.99 million for the quarter.
Technically speaking, the shares of GMCR have been on a tear in 2009, gaining more than 126% since the start of the year. In fact, the equity tagged a fresh all-time high of $72 on Aug. 7. The security has since pulled back to test support at its ascending 80-day moving average. Furthermore, the stock is drawing near intermediate-term support at its 20-week moving average, which rests near the 55 level. A rebound off either of these support levels could shake loose the bears on this stock, pushing it significantly higher.
Meanwhile, sentiment toward the coffee guru is less than enthusiastic despite the security’s outstanding performance. Options players have flocked to the stock’s puts in anticipation of additional losses. The International Securities Exchange (ISE) has reported 2.5 puts purchased to open for every one call purchased to open during the past 10 trading sessions. This ratio of puts to calls is higher than 69% of all those taken during the past year, pointing to a growing skepticism.
This Chicago Board Options Exchange (CBOE) has also reported an uptick in put trading. The ISE/CBOE 10-day put/call volume ratio checks in at 1.93, as put volume nearly doubled call volume among options. This ratio is also higher than 60% of all those taken during the past 12 months.
Furthermore, the Schaeffer’s put/call open interest ratio stands at 1.65, as put open interest outnumbers call open interest among options slated to expire in less than three months. This reading is also higher than 61% of all those taken during the past 52 weeks, pointing to bearish leanings among short-term options speculators.
Elsewhere, we find that short sellers have flocked to this equity, as more than 9.9 million shares have been sold short. This accumulation of pessimistic positions accounts for more than 30% of the company’s total float and is five times the equity’s average daily trading volume. An unwinding of these bearish bets could fuel a sharp rally in the shares.
Finally, we find that Wall Street has yet to jump on the stock’s bandwagon completely, as four of the seven analysts following GMCR rate it a “hold” or worse, according to Zacks. Any upgrades from this pessimistic pack could add some lift to the shares.
Overall, this combination of lingering pessimism as the stock tests key support levels has bullish implications from a contrarian perspective. Should the shares rebound from support, it could convince the bears to unload their short positions, pushing the stock to yet another new high.
Disclosure: Jocelynn Drake has no financial interest in any of the equities or products mentioned in this column.