Shares of Boulder Brands (BDBD) closed Wednesday’s trading session down 24.4% to $9.62. This was the first time shares had been below $10 since May of 2013. Shares traded as low as $8.72 early in the day after reporting initial third quarter results. My Stocks Under $20 portfolio bought shares at a cost basis of $9.76, immediately making the stock one of the top ten holdings.

Boulder Brands announced preliminary third quarter results. The company is expecting third quarter revenue to come in at $133.9 million, an increase of 13%. Earnings per share are expected to be $0.08. For the fourth quarter, Boulder Brands lowered its earnings per share guidance to $0.04, from a prior range of $0.18 to $0.20. Fourth quarter revenue is guided in a range of $132 to $137 million.

Yahoo Finance had third quarter earnings listed as $0.11. Third quarter revenue on Yahoo Finance was listed as $142.1 million, an increase of 19.9%. Yahoo lists fourth quarter targets of $0.18 and $150.8 million for earnings and revenue respectively.

Obviously looking above you can see that the company’s revenue and earnings come in much lower than those of analysts projections. However, on November 7^th the company will get to announce what areas saw weakness and what areas saw growth. My guess is the gluten free segment saw continued growth, but the natural foods (butter and spreads) saw more weakness.

Mario Gabelli and his associated mutual funds recently increased their position in Boulder Brands. He now has a stake of 7.4% in the company and could start to push for changes. Gabelli also was an investor in Annie’s prior to its acquisition by General Mills.

With today’s fall, Wall Street lit up with discussions of whether gluten free was now a dead industry. Well first off, it’s not dead, second this is most likely a big overreaction. I fully expect shares to rebound throughout the week and possibly rally after the earnings call is announced.

As someone who manages in a restaurant I can attest to the increasing interest of gluten free products on the menu. This comes from people with food allergies and without. The reasons could be because of better eating, a dieting plan, or allergy related.

I wrote an article at the start of the month about how the gluten free foodservice opportunity with Boulder Brands was being underestimated. Boulder Brands has partnerships with Papa Murphy’s, Smashburger, TGI Fridays, Donatos Pizza, and Holiday Inn Express.

Foodservice sales tripled in 2013 to $12 million. In 2014, foodservice sales are expected in a range of $17 to $35 million. As discussed in that article, Boulder Brands has ongoing discussions with other restaurants, including both McDonald’s and Burger King. After McDonald’s poor same store sales reported this week, what’s to stop them from adding a gluten free bun to the menu?

Boulder Brands acquired Udi’s, a leader in gluten free. That brand saw sales increase 33.7% in the second quarter. In 2013, sales of Udi’s increased 45%. I’m excited to see the growth figure for the third quarter and also how the overall growth was impacted by gluten free and the foodservice industry.

Do you believe gluten free is a fad or only targets a minimal market of people? If you answered yes then Boulder Brands isn’t a stock for you. If you however believe like I do that gluten free has a place in restaurants and will become more prevalent on menus, then Boulder Brands should be a long term holding in your portfolio.

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