Traders slammed Green Mountain in the after hours, sending shares tumbling as much as 30% in extended trade.
Although the company reported lower-than-expected quarterly results, hurt by weak sales, top hedge fund manager Whitney Tilson tells us something else may be behind the selling.
”The growth story looks like it was pumped up by shenanigans,” he says.
”There are many big questions here,” he says. But the biggest is probably that “inventories were up 356% year over year. And they don’t really provide a satisfactory explanation in the earnings release,” Tilson says.
”This smells to me like channel stuffing,” he says. “It looks to me like they pulled a lot of demand forward last quarter, stuffed the channel. “
And he thinks the sell-off is a sign “that game has come crashing down. This company may be in real trouble,” he says.
Of course Tilson is talking his book, he’s short Green Mountain. (And he may add to his short - “I thought it was over valued at $30 on the way up,” he tells us.)
But it isn't only Tilson who is skeptical of Green Mountain. Last month David Einhorn also raised questions about the company’s business model.
On the conference call Green Mountain said they're confident there has been no misconduct and no wrong doing.
But that may not matter.
”If you’re a money manager, now you have to peel out of the stock just because it could be a problem for your portfolio,” says Dan Nathan.
Looking at the rest of the earnings release, Green Mountain reported fourth-quarter sales of $711.9 million. Analysts were looking for sales of $760.5 million, according to Thomson Reuters I/B/E/S.
Net income was $75.4 million, or 47 cents a share, compared with $27 million or 20 cents a share a year earlier. Adjusted profit was 47 cents a share, compared with the 48 cents that analysts were expecting on average.
However, there was a bright spot, the company forecast a profit for the holiday quarter that was largely above analysts' estimates.
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Trader disclosure: On Nov 9, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour is long BAC; Seymour is long WFC; Seymour is long GLD; Seymour is long INTC; Seymour is long GE; Adami Owns AGU; Adami Owns C; Adami Owns GS; Adami Owns INTC; Adami Owns MSFT; Adami Owns NUE; Adami Owns BTU; Terranova is long CAT; Terranova is long LULU; Terranova is long STLD; Terranova is long MUB; Terranova is long SU; Terranova is long AAPL; Terranova is long IBM; Iuorio is net short Nov calls in VXX; Iuorio is net long Dec calls in VXX; Nathan has long AAPL Nov. 390 puts; Nathan has Jan 5 puts BAC; Nathan has long Jan 10 puts MS; Nathan has NFLX calls; Nathan has long Dec 23 puts INTC; Nathan has long Nov 60 outs GMCR; Nathan has long Nov 19 calls CSCO; Nathan has long Dec 10 puts NILE; Stutland is long BP call spreads; Stutland is long VLO stock and short calls; Stutland has long stock and short calls CSCO; Stutland has short puts AAPL; Stutland has short puts KO; Stutland is long stock and short calls INTC
For Brian Kelly
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Lead or Co-manager: BGC Financial LP and/or its affiliates, has not acted as lead or co-manager in a public offering of equity and/or debt securities for Cisco within the last 12 months. BGC Financial LP and/or its affiliates has not received compensation for investment banking services in the last 12 months from Cisco.
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