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Strategies & Market Trends : The Thread -- Ignore unavailable to you. Want to Upgrade?

To: DebtBomb who wrote (30677)	1/29/2001 11:13:24 AM
From: AD	Respond to of 49816

PEET is SWEET, I just added here in the 15's, to Friday's buys in the 10's . It's an IPO, for Peet's Sake 29-Jan-01 09:51 ET [BRIEFING.COM - Robert J. Reid] It's nice to write about IPOs again as they appear to be coming out of hibernation. The weak markets coupled with recent holidays have created a dearth of offerings. A stock which may peet your interest is Peet's Coffee (PEET 13) with it being one of only a handful IPOs has put it in the sights of many traders. Peet's is a specialty coffee roaster using multiple channels of distribution including specialty grocery and gourmet food stores, online and mail order and 58 company-owned stores in four states. Peet's is well established in the San Francisco Bay Area with new store additions in Boston, Chicago and Portland. Peet's has begun to reposition itself from a regional retailer that operates its own outlets into a national coffee brand. Deal led by Hambrecht. We're normally not excited over an IPO led by a smaller firm. The rule of thumb is that companies shop for the most prestigious name who will take the deal. So with a regional firm, it raises the question of why didn't Goldman want to lead it? Is there something wrong with the business model etc.? However, that rationale is somewhat inappropriate here because the deal is so small -- only 3.3 million shares. The biggies probably passed on it not because it was a bad company, but because it was too small a deal and not worth their time. Mikey Likes It. PEET has the spotlight to itself making it a guinea pig. The old days of piling in on the first day are behind us. Now traders take a more cautious approach and wait to see how it trades before getting in. Now that it has traded well for a couple of days, some scaredy cats on the sidelines should get involved. Valuation. The whole bean specialty coffee category is highly fragmented with over 500 smaller and regional brands that compete in this category. PEET is reasonably priced relative to its public peers. Green Mountain Coffee (GMCR 19 1/4) is Peet's most similar public competitor as they both have roughly the same level of sales around $70-$80 million. GMCR trades at a LTM price-to-sales ratio of 1.4x while PEET trades at 1.3x whereas Starbucks (SBUX 45 5/8) trades over 3x. Good Judgment. Management believes that limited and selective additions of new store sites, rather than broad scale site development, will better support its brand position and will make better use of its financial resources. The company's growth is expected to come from its underdeveloped distribution channels including specialty grocery and gourmet food stores, online and mail order and office and restaurant accounts which should increase as a percent of our total revenue. It's a good sign that they're not going to stretch their resources to grow at any price. Small Float. Because of its small float, it has the potential to move up quickly. But this also makes it more risky. Also, with only 8 million shares outstanding, the stock will have good leverage on price-to-sales valuations. Near Term Trade. Peet's is not a play where you should be putting your retirement money, but we expect it to do well in the near term as traders have been hungry for an IPO to run. Couple this with a small float and decent valuation and we expect traders to remain excited about this one in the near term. Please e-mail any comments to rreid@briefing.com.