Wedbush Analyst Sees Pullback In Keurig Green Mountain Justified, Starts At Neutral

In a report published Thursday, Wedbush analyst Phil Terpolilli initiated coverage of

with a Neutral rating and a price target of $100, even after the recent downturn in the company's share price. In the report Wedbush noted, "We believe expectations surrounding GMCR's 2.0 platform and upcoming Keurig Kold launch have been appropriately reset, but see limited visibility into incremental opportunities of both at the present time. With noticeable incremental spending in FY15/16 behind both, we believe GMCR is unlikely to experience meaningful earnings acceleration that would justify a premium multiple to current levels." Keurig's 2.0 launch faced a challenging holiday season. This points to the fact that it may be tough for the company to bring in incremental consumers to the system. Analyst Phil Terpolilli added, "Keurig's recent launch of a lower-priced K250 is a step in the right direction, but does not identify a meaningful solution to solving this conundrum." Terpolilli believes that operating costs and inflation would be headwinds for the company in FY15 and FY16. Moreover, Keurig Kold's "soft" launch online is "evidence of mixed progress in making a superior platform to current carbonated beverage consumption." Given the launch timing, there is unlikely to be "meaningful accretion" until FY17. Terpolilli expects the company's earnings growth to be lackluster over the next 24 to 36 months, which is why the stock deserves to trade at "a discount to prior averages."