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We are a poweful option trading newsletter that focuses on momentum stocks. Momentum can be used to the upside or downside to play call and put options on stocks that are in a clear trend. We target triple-digit returns for all option trades while trying to keep losses at 50%. We have 6-year... More
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  • Green Mountain Turning Red After Earnings 0 comments
    Dec 10, 2010 1:15 PM | about stocks: GMCR
    MomentumOptionsTrading.com Midday Update for 12/10/10
     
     
    Green Mountain Turning Red After Earnings
     
     
    1:00pm (EST)
     
    The market opened slightly higher but has bounced around a little as the bulls are having trouble holding their gains while the bears are trying to hold down resistance.  It has been a tight week but the bulls are winning on the judges’ scorecard and could manage a clean sweep if the Dow can close above 11,383.

    There are a few nuggets of infomation worth mentioning today as far as earnings and economic news. A better-than-expected University of Michigan Consumer Confidence reading has done little to help the bulls as the December reading came in at 74.2, up from 71.6 in November. Wall Street was looking for a print of 72.5.

    Elsewhere, U.S. exports in October rose a robust 3.2% while imports declined.

    Turning to earnings, Green Mountain Coffee Roasters (GMCR, $32.99, down $4.43) is down 12% despite reporting stronger-than-expected 4Q results after the bell last night. The company said it earned $27 million, or $0.20 a share, versus $14.1 million, or $0.11 a share, in the year earlier period. Revenue soared nearly 75% to $373 million as the company continues to see strong growth from their Keurig single-cup coffee business.

    The results beat Wall Street’s forecast of $0.20 a share on revenue of $359 million.

    For its 2010 fiscal year, Green Mountain earned nearly $80 million, or $0.58 share as total revenue soared to nearly $1.4 billion. Impressive numbers.

    Shares are taking a hit after Green Mountain forecast 1Q earnings of $0.14-$0.18 a share on sales growth of 55%-65%.  The pencil pushers were looking for $0.20 a share on sales growth of 48%. For the new year, the company now sees earnings of $1.19 -$1.29 on sales growth of 45%-53%, versus a prior view of $1.24-$1.29 on sales growth of 44%-50%.

    We think the company could be sandbagging their numbers but they lowered their outlook due to rising coffee prices and the cost of launching new products. There could be a little weakness in shares and a possible drop to $30 but we love this company over the long-term.

    If you look at our track record for 2010, we have played call options twice on Green Mountain this year and have done pretty well. In January, our subscribers booked 150% on call options and in June we profiled another call option trade that banked our members 50%. There have been times where we have thought of buying puts but we normally don’t like shorting strong companies unless the chart says so.

    We know Green Mountains’ chart like the back of our hands and there could be a trade going forward but we aren’t sure just yet if it will be a call or a put. Stay tuned…

    We will be back this weekend with the Weekly Wrap on Sunday but things are looking good as we head into the close.

    The Dow is up 17 points to 11,387 while the S&P 500 is higher by 5 points to 1,238. The Nasdaq is showing a 12 point pop and is at 2,628.

    Have a great weekend everyone and make sure you don’t miss Sunday’s big issue for the Weekly Wrap. Subscribers, please check the Members Area for the updates as one of our trades has hit a 210% return while the other is up 196%!
     
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