KeyBanc Remains Bullish on Keurig Green Mountain (GMCR) Following Debut of New 'Kold' Brewer

(Updated - May 15, 2015 7:37 AM EDT)

KeyBanc maintains an Overweight rating and price target of $175 on Keurig Green Mountain (Nasdaq: GMCR) following debut of the company's new Keurig Kold brewer.

Keybanc expects the price point of GMCR's new brewer will come down over time. Analyst Akshay Jagdale said that "more importantly, beverages produced by the machine taste good."

Jagdale commented on the new brewer, saying, "Although initial Kold brewer pricing was above our expectations, we maintain that the price points will come down significantly over time. Management commented that the Kold brewer will initially be priced in the range of $299 - $369, while Kold pods will be priced in the $0.99 - $1.29 range.

We had said previously that we expect the Kold machine to be launched at a relatively high price point initially. As such, the announced price range did not come as a complete surprise to us; however, it was higher than we expected.

Our conversations with management lead us to believe that the higher cost (relative to Hot brewers) is driven mainly by the Kold’s sturdier construction (as opposed to overly expensive componentry), which requires stronger materials to withstand the greater pressures generated within the brewer. While we expect the price point to be viewed negatively by some, management commented that it is seeing strong purchase intent among consumers at the announced price points and that it continues to expect the price of the brewers to come down over time as the business scales up. With respect to pods, the $0.99 - $1.29 price range was generally in line with our expectations."

For an analyst ratings summary and ratings history on Keurig Green Mountain click here. For more ratings news on Keurig Green Mountain click here.

Shares of Keurig Green Mountain closed at $103.08 yesterday.

You May Also Be Interested In

• KeyBanc Reiterates Sector Weight Rating on Herc Holding (HRI)
• KeyBanc Reiterates Sector Weight Rating on Snap Inc (SNAP)
• KeyBanc Reiterates Overweight Rating on Verizon Communications (VZ)