Schaeffer's Trading Floor Blog

Surging Keurig Green Mountain Inc (GMCR) Continues to Face Doubt

Short sellers and analysts have disregarded GMCR's technical track record

by 6/12/2014 1:54 PM
Stocks quoted in this article:

Keurig Green Mountain Inc (NASDAQ:GMCR) has tacked on over 4% this afternoon to trade at $120.88, with the stock earlier bouncing off its 10-day moving average, amid unconfirmed buyout rumors involving The Coca-Cola Company (NYSE:KO). This is more of the same for shares of the single-serve coffee king, which have advanced roughly 60% in 2014 and outperformed the broader S&P 500 Index (SPX) by almost 13 percentage points in the last two months. From a sentiment perspective, however, pessimism prevails.

For one, although short interest has fallen in recent reporting periods, it's still significant. Specifically, 10.4% of GMCR's float (12.6 million shares) is sold short, which would take seven sessions to cover, at the stock's average daily trading volume. If the equity continues to flex its technical muscles, a short-covering rally could ensue.

Moving to Wall Street, the outlook is largely skeptical. Among covering analysts, Green Mountain has received eight "hold" or worse recommendations, versus just four total "buy" ratings. If that's not enough, the equity's consensus 12-month price target is $121.89 -- or less than 1% from the current share price. In other words, GMCR has the potential to run even higher, should covering brokerage firms upwardly revise their ratings and/or price targets.

Meanwhile, in Keurig Green Mountain Inc's (NASDAQ:GMCR) options pits -- where total volume is running at four times the intraday average today -- short-term contracts are relatively cheap right now. In fact, the stock's Schaeffer's Volatility Index (SVI) of 38% is in the bottom 8% of its annual range.


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