Does Starbucks Get the Better End of GMCR’s Deal?

Critical comments about Green Mountain Coffee Roasters‘ (NASDAQ:GMCR) accounting work sharply drove stock down after David Einhorn slammed the company’s deal with Starbucks (NASDAQ:SBUX). Einhorn says the partnership will prove less lucrative than some expect, and considers its K-Cups to be too expensive. Coffee Holding Co (NASDAQ:JVA) is also selling off on the news.

David Einhorn’s presentation was a knife as Green Mountain Coffee Roasters’ (NASDAQ:GMCR) stock was already down 6% within 90 seconds of the beginning of his 110 slides slide show. Twenty-five minutes into the presentation, shares were off 9%. Bulls see normalized GMCR earnings reaching $9 per share, but Einhorn says the more likely figure is $3.50.

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“Starbucks (NASDAQ:SBUX) appears to be getting the lion’s share of the profit split on the sale of each K-Cup, Einhorn estimates: ‘Starbucks should make about 2/3 of the profits.’ And sales of the Starbucks packets could cannibalize GMCR’s existing higher-margin sales,” according to Barron’s.

Other coffee companies are also trading lower today: Dunkin’ Donuts (NASDAQ:DNKN), Peet’s Coffee and Tea (NASDAQ:PEET), and Caribou Coffee Company (NASDAQ:CBOU).

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