Keurig 3Q15 Earnings Call Notes

5% decline in revenue due to slower installed bas growth and increased competition in pods

“The 5% decline in revenue in the quarter was below our expectations, as we continued to experience challenging category dynamics, due to slower than expected installed base growth and increased competitive activity in pods.”

More unlicensed brands leading to excess capacity at manufacturers and aggressive pricing

“As we bring in more previously unlicensed brands to our system, we believe other pod manufacturers have excess capacity, which has led them to respond with more aggressive pricing. Additionally, some branded partners have remained promotional. During the third quarter, the challenges were greater than anticipated and impacted pod volumes. ”

Growth in measured channels is strong, but weakness in some unmeasured channels

“Volume growth in the U.S. measured channels continues to be strong at 15% total category growth in the quarter, according to IRI. However, we continued to see weakness in several unmeasured channels, including the specialty channel and digital.”

Brewer volumes down 18% as work through inventory

“Brewer volumes were down 18% in the quarter, as we continued to work through the high levels of inventory at retail on Reservoir Brewers and experienced lower sales of MINI brewers, as we continue to restock that product at retailers. Brewer price realization declined in the quarter due to investments we made in brewer promotions to work through inventory.”

When Momentum Stocks Break

Tesla is now down 38% from its peak and appears to be suffering the same fate as many other momentum stocks before it.  In order to help chart what $TSLA’s decline could look like, below is a list of the number of weeks that it took 11 other broken momentum stocks to lose 50% of their value from their peak.

It took these stocks 12 weeks on average to lose half of their value.  If Tesla matches that pace it could be below $100 by mid December.  On average, these stocks lost 91% of their value before their declines were over and the average duration of decline from peak to trough was 100 weeks (about 2 years).

Of course for every example here there is probably another example of a momentum stock that appeared to break but then recovered.  Chipotle and Monster Beverage are two that come to mind that came close to 50% declines before recovering.  Indeed, several of the stocks on this list (Netflix for example) have recovered quite a bit from their drawdowns.  In the end though, valuation always wins.

Related reading: Where do growth stocks peak?; Anatomy of a Short Squeeze

Broken Momentum Stocks