Barriers to entry: Green Mountain edition

The market for single-cup coffee in the US has become more crowded:

Reuters) – Shares in Green Mountain Coffee Roasters Inc (GMCR.O) tumbled 14 percent on Friday, on fears that it may lose its near monopoly in the U.S. single-cup coffee market after partner Starbucks Corp (SBUX.O) outlined plans to launch a rival coffee and espresso machine.

Of course, Green Mountain is downplaying this:

“There is (also an) opportunity for complementary high-pressure espresso-based systems,” Green Mountain Chief Executive Lawrence Blanford said in a statement on Friday.

At current prices, Green Mountain is still valued at 14 times EV EBITDA and 4 times sales and a P/E of 30. For a company in a market where really strong competitors just can enter like this, maybe still far too expensive.

It will be interesting, how far the stock price goes down this time.

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