We saw two very controversial companies announce earnings after the market closed on Wednesday, which then led to massive gains. In this piece, I am looking at these two companies to assess the quarter, valuation, and to determine if any are a “buy.”
Solid Growth, Partnership, & Fair Value Lead to Large Gains
From gains of 10% during Wednesday’s after-hours session, to gains of 20% midday on Thursday, to finally breaking above 27%, shares of Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) exploded after reporting earnings. The company posted revenue of $1.00 billion for a 14% year-over-year (yoy) gain and then beat bottom line expectations by $0.20 with an EPS of $0.93. In the quarter, sales of single serve packs increased 21%, volume increased 26%, and margins rose 290 basis points due to lower green coffee costs. On a side note, the company announced a five-year deal with Starbucks Corporation (NASDAQ:SBUX) to triple the number of products offered in the single serve market.
As I look at the company’s quarter, I really can’t find any negatives, and believe me, I looked hard. The company has lower costs, double digit revenue growth, and is expecting 14% bottom line growth this year. However, I think it’ll grow faster with the new partnership with Starbucks Corporation (NASDAQ:SBUX). The reason being some people complain that there aren’t enough flavor choices with k-cups (my wife included) that are carried in store, and with a broader selection I think we’ll see a boost in sales along with more investment interest due to the partnership.
Currently, Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) is trading at 2.15 times sales with a forward P/E ratio of 21. In my opinion, the stock’s fairly valued, and I think GMCR could see further gains in the next year with a change in sentiment.
The Next Great Speculative Investment?
After a month of speculation, Tesla Motors Inc (NASDAQ:TSLA) blew through earnings expectations and traded higher by a mind-boggling 25%. The company grew 16% yoy with revenue of $562 million ($63 million better than the consensus) and an EPS of $0.12 ($0.08 better than expectations). The large beat was thanks to the company outperforming production guidance of the Model S, which then helped gross margins to double to 17%. Tesla now believes it will exceed its guidance of 20,000 vehicles delivered in 2013, which could be in part due to the Model S receiving the first 99 out of 100 score from Consumer Reports since 2007.
At first I was very skeptical of Tesla Motors Inc (NASDAQ:TSLA), believing the stock had gotten ahead of itself and that it was too expensive; trading at just one-fifth the valuation of General Motors Company (NYSE:GM) but only a fraction the size. However, Tesla is not only an automotive company but also a technology company, and has created something remarkable. The company does have the Model S but also a Model X in the pipeline and because of the performance I think Tesla Motors Inc (NASDAQ:TSLA) is a great long-term investment.