Stock (Symbol) |
Starbucks (SBUX) |
Stock Price |
$61 |
Sector |
| Retail & Travel |
Data is as of |
| January 31, 2016 |
Expected to Report |
| April 21 |
Company Description |
 Starbucks Corporation is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 65 countries. The Company purchases and roasts high-quality coffees, along with handcrafted coffee, tea and other beverages and fresh food items, through company-operated stores. The Company sells goods and services under the brands including Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, La Boulange and Ethos. The Company has four operating segments: Americas, which is inclusive of the US, Canada, and Latin America; Europe, Middle East, and Africa (EMEA); China/Asia Pacific (CAP) and Channel Development. The Company sells Starbucks and Seattle’s Best Coffee roasted whole bean and ground coffees, Tazo teas, Starbucks VIA Ready Brew, and other coffee and tea related products to institutional foodservice companies that service business &industry, education, healthcare, office coffee distributors, hotels, restaurants, airlines and other retailers. Source: Thomson Financial |
Sharek’s Take |
 Starbucks’ (SBUX) Mobile Order Pay app lets customers order before they get to the coffee shop, pay via their phone, not have to wait in line and is boosting sales. Last qtr the company posted sales growth of just 12%, but the all-important same store sales (SSS) figure was 8%. SSS is a key to retail stocks as it drives profits to the bottom line, and 8% may be what kept SBUX stock from buckling during the worst January for stocks in years. This company is on the cutting edge of innovation. In addition to Mobile Order Pay SBUX has loyalty rewards program gives customers a free item if they buy 12 cups of coffee, and now you can get coffee delivered as well. SBUX continues to expanded in the US and is expected to double its store count in the China Asia-Pacific region in five years, but then they have to deal with F/X. This stock is a little high right now, digesting the gain from $40 to $60 it made in around a year’s time. The trouble with that move is profits didn’t grow 50% during that period, they only grew in the high-teens, so the P/E got extended. Now this 18% grower sells for a lofty 32x earnings. I like the stock, but would love it at $50. |
One Year Chart |
 So during this ferocious stock market correction we had this past month I was hoping to get some SBUX on a dip. But notice how the stock barely fell. That’s quality right there. Right now profits are growing in the mid-to-high teens but when I look 3 and 4 qtrs out I see profit estimates of 28% and 20%. That would be great, and SBUX has a Sept 30th fiscal year end so by then we will be looking at 2017 estimates. The stock sells for 28x 2017 profits right now. So maybe the stock won’t give us a nice dip to buy into. |
Fair Value |
 I’m always surprised that this stock has a P/E of around 30. It’s only been growing 18% to 20% the past few years. Premium price for premium coffee. Still, when the company reported profits last qtr the stock didn’t go up much. I think investors feel like I do: stock’s a little high. |
Bottom Line |
 Starbucks is a great franchise to own. This stock gets a top safety rating of 1 from Value Line, has a solid 18% estimated long-term growth rate in addition to a 1% yield and ranks 13th of 34 stocks in the Conservative Portfolio Power Rankings. I’m looking to buy it in the Growth Portfolio, but since I try to get higher returns in this portfolio I’m waiting to buy in at a better price. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 13 of 34 |
