Keurig Green Mountain Inc’s (GMCR) stock has corrected quite a bit in the month of May is trading near its 52-week low. However, if recent insider buying activity is anything to go by, the company insiders still are bullish on the company's prospects and buying GMCR's shares. The company's director Susan Kilsby and Norman Wesley bought 5,000 shares each on May 12 while another director Michael Mardy bought 1,000 shares on 15th May after the stock price fell post Keurig KOLD presentation.
The company's stock corrected after its presentation indicated slower-than-expected roll out of Keurig KOLD and high initial price point ($300) for the product. Morgan Stanley analysts have maintained their Overweight rating on the company post presentation. In a recent research report they noted:
“We believe the quality of product was very solid and will meet expectations of initial adopters of the technology, and we were encouraged to hear management's continued optimism regarding the platform's expansion potential outside the US.”
They further added:
"The stock still strikes us (although now at lower levels) as a business with a uniquely dominant position in one of the few high growth US food and beverage categories, and we remain confident that as the current level of uncertainty and transition normalizes GMCR will see a valuation more aligned with its mid-term growth potential."
According to the company, its Keurig cold beverage system will meet a number of consumer needs:
- delivering the beverage cold versus ambient;
- offering a consistent and simple carbonation process at the touch of a button;
- enabling consistent and exact dosing of different levels of carbonation and flavoring;
- offering wide brand choice and variety; and
- ”‹being offered at an attractive price point similar to its Keurig hot platform brewer line-up, with a footprint suitable for a kitchen counter.
GMCR has seen tremendous growth in its topline and bottomline over the last 10 years. While the company’s topline has grown at a 10-year CAGR of 42%, its bottomline has increased by a CAGR of 56.70% during the same period.
The big question question as of now is whether this level of growth can continue and will Keurig KOLD be able to gain significant traction post launch to be the next big growth driver for the company. While recent correction indicates that investors are a bit wary, insider purchases in the month of May indicates that insiders remain bullish on the company's prospects. If insider buying pattern is anything to go by, I believe growth-oriented investors can consider going long on GMCR after recent correction.
