Goldman Downgrades Keurig, Calls Move 'Three Quarters Too Late'

In a report published Thursday, Goldman Sachs analyst Judy E. Hong downgraded the rating on

, while lowering the price target from $120 to $66. The stock was also removed from Goldman Sachs' Americas Buy List. While another sales miss and a further guidance cuts might be "difficult to defend," the analyst believes that an inflection point appears to be further delayed. "We still believe in the business model and long-term growth outlook and valuation is washed out, but we see the stock range-bound until a fundamental inflection point becomes more visible," Hong stated. The analyst believes that the duration and magnitude of the negative impact on sales and profit due to weaker brewer sales during the holiday season might have been underestimated. However, given that the company has cut its guidance for the third time, the stock seems difficult to defend. "We still believe that (1) GMCR can grow the installed base on Hot, (2) margins should stabilize longer-term, and (3) Kold should provide incremental sales and profit over time," the Goldman Sachs report said. However, the analyst does not expect the stock to rebound till there is a positive inflection and the management is able to regain investor confidence.