Does Keurig Green Mountain's Crash Make It A Value Play? Three Analysts Discuss

Shares of

plunged nearly 30 percent Thursday morning following a difficult quarterly print and disappointing guidance. The question Keurig shareholders are now asking is if the crash in the stock offers a "value" play opportunity.

Mark Astrachan of Stifel commented in a note that Keurig's brewer weakness suggests that consumer adoption of its 2.0 brewer is "underwhelming," likely indicating that household penetration is nearing or at saturation. Astrachan also noted that weaker brewer growth hurt Keurig's main "profit driver," its K-Cups. At the same time, K-Cup brands are actually losing market share which hurts Keurig's overall sales and profit mix. The analyst added that he expects these trends to continue for the foreseeable future. Astrachan finally noted that there also exists "considerable" questions surrounding KOLD. As such, the analyst opined the stock will likely underperform in the short term but could find support in the mid-$40 level. Shares were maintained at a Hold rating with no assigned price target.

Judy Hong of Goldman Sachs downgraded shares of Keurig to Neutral from ‘Americas Buy List' with a price target slashed to $66 from a previous $120. Hong commented that another quarter of sales miss and lowered guidance (even on an already low expectation) are "difficult to defend." The analyst added that she "underestimated" the magnitude and duration of the negative sales and profit impact from weaker brewer sales during the holiday period. However, the analyst did state that she believes in the company's business model and long-term growth outlook. Specifically, Keurig can still: 1) grow its installed base on Hot, 2) stabilize margins over the longer-term, and 3) benefit from Kold incremental sales and profit over time. With that said, Hong argued the stock may not rebound until data points "inflect positively" and management regains investors' confidence. Finally, at $53 per share, Keurig has the lowest P/E multiple within Hong's coverage universe at 15.5x. The analyst's $66 price target is based on a 17x EPS multiple which is in the low-end of beverage peers (average 23x). Bottom line, the analyst stated that the stock could likely "over-correct" in the near-term on the company's poor guidance and limited earnings visibility. However, the downside risk appears "relatively limited" at current levels.

Phil Terpolilli of Wedbush maintained a Neutral rating on shares of Keurig with a price target lowered to $67 from a previous $85 as the company faces a "challenging road" ahead. According to Terpolilli, shares of Keurig could be "potentially oversold" following its quarterly print. However, the analyst noted that near-term trends proved to be "far worse than we anticipated" and the company's guidance "holds limited weight" given recent quarterly disappointments. Terpolilli concluded that without incremental visibility into legacy install base growth, the company's ongoing margin structure and success of KOLD, investors should "avoid" shares until a more specific catalyst event presents itself that can support shares.