Morgan Stanley: Keurig Green Mountain Continues To Be A Buy

In a report published Friday, Morgan Stanley analyst Matthew Grainger maintained an Overweight rating on

, while reducing the price target from $140 to $130. The stock is currently trading at a significant discount to its peers, despite potential for secular growth. The company's possess potential for secular growth from the ongoing expansion of its single-serve coffee offering, as well as its disruptive innovation platform in the form of KOLD. The current discounted stock valuation, therefore, presents an attractive opportunity. However, given the current market sentiment, the company would need to post a meaningful improvement in results, following the recent earnings miss, to be able to drive the stock up. "We remain confident that GMCR's core Hot business can recover to ~7 percent+ top line growth in 2016 post the temporary impacts of weak initial 2.0 brewer sales and an initial mix headwind from recent contract wins," Grainger stated. The analyst believes that top-line growth could be driven by continued double-digit growth in the K-Cup category, as well as additional opportunities to expand penetration for the single serve coffee category in the U.S. The analyst also expects the company to benefit from international expansion opportunities and sustained brewer purchase intent. "We are not dismissive of investors' concerns surrounding soft brewer sales and promotional/mix pressure in K-Cups, but do not believe these temporary dynamics limit a return to mid-to-high single digit growth," the Morgan Stanley report said. The estimates for the company have been revised to reflect the slower than anticipated rollout of KOLD. "However, we remain positive on the potential for KOLD, and believe the combination of strong product quality and innovative technology will prove compelling," Grainger added.