Janney Montgomery Scott Downgrades Peets Coffee & Tea (PEET) to Sell; Starbucks Deal With GMCR Likely Boxes PEET Out of K-Cups

March 10, 2011 7:29 AM EST Send to a Friend
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Price: $73.46 --0%

Rating Summary:
    1 Buy, 8 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 13 | Down: 18 | New: 41
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Janney Montgomery Scott downgraded Peets Coffee & Tea (NASDAQ: PEET) to Sell.

JMS analyst says, "On the heels of this morning's news that Starbucks (Nasdaq: SBUX) and Green Mountain Coffee Roasters (Nasdaq: GMCR) announced a strategic relationship for the manufacturing, marketing, distribution and sale of Starbucks-branded K-Cups for use in GMCR's Keurig single-cup brewing system, we are downgrading PEET to a SELL. Last week, upgraded the stock to a BUY on our view that PEET was likely to join the Keurig platform, based on the logic that the strength of the Peet's brand on the west coast (13% grocery share vs. Green Mountain's 2% share) could drive meaningful adoption of Keurig brewers the geography where Keurig's penetration is the weakest. We reasoned that by joining the Keuirg platform in 2011, there was the potential for an incremental $1.00 in EPS in 2012 and thereby upside in the stock to $57/sh. In light of this morning's announcement, we believe the opportunity for PEET to partner with GMCR is all but gone, and as result we are reverting back to our $42/sh fair value estimate, derived from our discounted cash flow analysis."

For more ratings news on Peets Coffee & Tea click here and for the rating history of Peets Coffee & Tea click here.

Shares of Peets Coffee & Tea closed at $48.05 yesterday.


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