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Ahead of the Bell: Green Mountain Coffee Roasters

A pair of analysts shrugged off some sharp criticism of Green Mountain Coffee Roasters Inc. on Tuesday, with one saying that the company's in a good spot to continue to lead the growing U.S. single-serve coffee market.
/ Source: The Associated Press

A pair of analysts shrugged off some sharp criticism of Green Mountain Coffee Roasters Inc. on Tuesday, with one saying that the company's in a good spot to continue to lead the growing U.S. single-serve coffee market.

Akshay Jagdale of KeyBanc Capital Markets said in a client note that hedge fund manager David Einhorn's issues with the company — including patent expirations, accounting restatements and an SEC inquiry — have always been among Jagdale's concerns as well. But the analyst's current positive view on the coffee company is based on its domestic single-serve coffee market position and its potential in the non-carbonated beverage market.

Einhorn's comments about Green Mountain came during the Value Investing Congress conference in New York on Monday. A representative for Green Mountain could not be immediately reached for comment on Tuesday.

Jagdale said Green Mountain has said that its Keurig single-cup coffee machines are currently in about 8 percent to 9 percent of U.S. households. Jagdale thinks that will climb to 22 percent by 2013.

The analyst kept a "Buy" rating and $120 price target on Green Mountain shares.

Janney Capital Markets' Mitchell Pinheiro was critical of Einhorn's presentation, saying that it "ignored factual evidence of strong market takeaway performance in the housewares (brewers) and coffee categories."

Pinheiro expects Keurig's strong growth to continue for several more years.

"Keurig is a premium product that has found surprising strength at the low end — the penetration potential is larger than we thought — not smaller," Pinheiro said.

The analyst said that Green Mountain's biggest challenge has been trying to keep up with demand and that the company is building capacity as fast as it can.

Pinheiro reaffirmed a "Buy" rating and $125 price target.

Shares of Green Mountain fell $1.19 to $81.31 in premarket trading.