GMCR Drops 30%

Earnings and Revenue Lower than Expected

GMCR released a statement confirming that it missed earnings and revenue expectations this quarter.  More specifically, GMCR missed the forecasted EPS by 1 penny.  In addition, they reported a revenue stream of $712 million instead of the expected $761 million.  Despite the fact that these missed expectations are most likely due to normal fluctuations in demand inherent to the coffee industry, investors turned sour and sent shares tumbling 30% in after-hours market trading.  For more information click here.

GMCR Addresses Einhorn's Criticism

Another big story coming out of GMCR today was that it addressed criticism from David Einhorn.  The CEO of GMCR, Larry Blanford, said that the company hired an audit committee that found no misconduct or wrong doing with GMCR.  He also added:

“We understand with success comes scrutiny, and at times skepticism.”

Unfortunately, these positive comments did not prevent the drastic after hours share price decline.

What to do Now

As an owner of GMCR shares, I have held onto my position all the way through this crisis.  My investing strategy is to stick with a company unless my investment thesis for it has changed.  As I see it now, GMCR still has a strong product that will continue to produce high revenues and earnings in the future.  Investors must understand that GMCR's missing earnings and revenue expectations are simply a byproduct of the company's wild success.  If it hadn't been performing so well in the beginning, expectations wouldn't have been so high!

Having said that, I do not believe that RIGHT NOW is the best time to invest in GMCR.  With so much skepticism surrounding the stock amidst the Einhorn allegations, it is best to let the stock settle a bit before investing.  If you REALLY want to invest in GMCR, I would recommend pursuing a dollar cost average strategy where you invest a third of your intended investment now, another third a month from now, and a final third three months from now.  This way you will protect yourself and possibly benefit from possible price fluctuations.

Michael R Caligiuri owns shares in GMCR