UPDATE: BTIG Initiates Coverage On Keurig Green Mountain

In a note date June 18, BTIG analyst Theo Brito initiated coverage on Keurig Green Mountain GMCR with a Neutral rating and announced a $124 price target.

Market Penetration
Brito is taking a cautious to slightly bearish position on Keurig. He began his coverage by noting he believes market penetration is more than twice what bulls are estimating (~45 vs <20 percent). In conjunction with this belief, he is modeling eight to nine percent growth versus a consensus of ~10 percent and says there may be downside to his estimate.

Margin
In a addition to his concerns about market penetration, Brito also believes that, although the company's decision to bring in big brands, such as Starbucks may help growth potential, it will do so at the cost of cannibalizing a portion of high margin Green Mountain brand sales.

Value
The final concern Brito mentioned was, ~50 percent of the current share value is from options. He noted that prior to the partnership with Coke option value accounted for ~10 percent. Although he acknowledged the partnership with Coke is a "strong endorsement" of the Cold System, he believes it will be years before anyone knows its true potential.

Shares of Keurig are down less than one percent in Thursday's pre-market session.