The Zacks Analyst Blog Highlights: Starbucks, Green Mountain Coffee Roasters, Illumina, Roche and Life Technologies

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Mar 13, 2012, 09:30 ET

CHICAGO, March 13, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Starbucks Corporation (Nasdaq: SBUX), Green Mountain Coffee Roasters (Nasdaq: GMCR), Illumina (Nasdaq: ILMN), Roche (OTC: RHHBY) and Life Technologies (Nasdaq: LIFE).

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Here are highlights from Monday's Analyst Blog:

Brewing Starbucks at Home

Coffee giant Starbucks Corporation (Nasdaq: SBUX) recently announced plans to launch the Verismo system, a premium machine which will allow customers to prepare Starbucks-quality espresso and coffee drinks at home, a cup at a time.

The Verismo single cup coffee machine will be available by fall 2012 and is a major step by the company to take a share of the premium single-cup segment, which is the fastest growing market in the coffee industry. The premium single cup segment grew more than 135% over last year in the US and is expected to become an $8 billion market globally. The machine will allow customers to brew espresso based beverages and milk-based beverages on their own, at their workplace or at home.

The Verismo system will be sold online, at some Starbuck retail stores and also in some specialty stores in US, Canada and in other unspecified international markets. Starbucks will market and sell the Verismo machine and arabica coffee and milk pods through a strategic partnership with privately-held, Germany-based Krueger GmbH & Company.

Starbucks already has a presence in the premium single serve market with its Starbucks VIA Ready Brew instant coffee (launched in 2009) and Starbucks K-Cup packs (launched in fall of 2011). Starbucks sells the K-Cup packs to Green Mountain Coffee Roasters (Nasdaq: GMCR) to be used on the latter's Keurig single-cup machines. Management believes the Verismo system is complementary to the above products and Starbucks can now offer a comprehensive portfolio of premium single cup alternatives.

Starbucks ruled out any competition between its high pressure Verismo machine and Green Mountain's low pressure Keurig machine. Starbucks believes its high pressure machine will be competitive with Nestlé's Nespresso machine. Shares of Green Mountain, however, witnessed a sharp decline after the announcement of the news. Starbucks will continue to supply K-Cup packs to Green Mountain.

We expect Starbucks to go off to a strong launch with the Verismo System. However, we cannot rule out the fact that at-home, single-cup machines like Verismo can cannibalize sales of other Strabucks products.

Our recommendation

We currently have a Neutral recommendation on Starbucks. The stock looks more appealing near term with a Zacks #2 Rank (a short-term Buy rating).

Illumina Unveils TruSeq Amplicon

Illumina (Nasdaq: ILMN) unveiled TruSeq Amplicon last week, which is a cancer panel to aid researchers to sequence cancer loci. This is significant since this makes sequencing possible even in difficult samples such as formalin-fixed, paraffin embedded ("FFPE") tumor samples. The San Diego-based company is taking orders for the device, shipment of which will begin next month.

Dr. Andrew Fellowes of the Department of Pathology at the Peter MacCallum Cancer Centre in Melbourne, Australia believes that the TruSeq cancer panel on the MiSeq system will enable them to profile tumor samples for a wider range of mutations. Moreover, this technology improves upon both speed and accuracy.

The introduction of TruSeq Amplicon - Cancer Panel is in sync with Illumina's recently created Translational and Consumer Genomics ("TCG") business, which is focused on delivering genomic solutions to CLIA labs. This business is already working to develop targeted resequencing panels for both MiSeq and HiSeq systems, building on the current TruSeq Amplicon and TruSeq Enrichment assays.

The company has been in the news over the recent past as Roche (OTC: RHHBY) commenced a tender offer to purchase Illumina's outstanding shares. Earlier, Roche had made several unsuccessful attempts to strike a deal with Illumina, but the latter refused to participate in any substantive discussion.

Illumina introduced HiSeq 2500, a new multi-mode next-generation sequencer earlier this year, which is slated for launch in the second half of 2012. The DNA sequencing market is getting more competitive as Life Technologies' (Nasdaq: LIFE) Benchtop Ion Proton Sequencer is expected to hit the market in mid-2012. These devices can sequence a human genome in a single day rather than weeks. In addition, Illumina is also working on developing its MiSeq platform further.

Illumina has entered into a partnership with Siemens Healthcare Diagnostics to use the MiSeq platform for Siemens' molecular HIV tests. In addition, the company expanded its Genome Network with the inclusion of British Columbia Cancer Agency to its existing list.

Presently, Illumina retains a short-term Zacks #2 Rank (Buy).

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