What do you think about Starbucks (SBUX)?
Howard Schultz is back. Everybody likes coffee. It's cheap. What can go wrong?
Best Answer
3127 points
EthanR answered 11 months ago …
I had previously mentioned SBUX in an article I wrote for The Tycoon Report, as a good stock to short (see link below). At the time, SBUX was at 23.14. SBUX hit 18.00 the other day, then bounced up on an announcement that Chairman Howard Schultz will return as CEO. But the bounce may have been short lived, as the stock was back down yesterday by over 2% to current price of 19.46.
http://tycoonreport.tycoonresearch.com/articles/831231609/stocks-to-short-for-the-recession
Sure, everyone likes coffee, and SBUX is cheaper (not cheap), but not everyone likes paying four or five dollars for coffee in a recessionary economy. McDonald's (MCD) is going head to head with SBUX, but is charging less. And of course, there is always Dunkin Donuts, and the capuccino machines in your local convenience store. Plenty of competition.
Even if SBUX doesn't go too much lower from here, I see it as pretty much dead in the water for some time to come. I think MCD is the better stock to buy if you want a coffee play.
Answers
314 points
Ifly answered 11 months ago …
Technically I cannot see anything that makes me want to go long!
Ifly
583 points
jillybeansisme answered 11 months ago …
Also realize that SBUX has slipped in the last year not just from $23+/-, but from $38+/share. They've grown too large too fast, and reorganization takes time. I sold it.
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2703 points
MNSL answered 11 months ago …
I recently read a book about how to find companies like Star bucks. It has a great story and one of the best rewarding stocks ever had for investors. But when competition arises we must be careful. If new player takes big market share then it will affect for Star Bucks. We have to wait and see how it is going to affect. If MacDonald’s (MCD) charge less for their products then there will be less demand for Star Bucks products. But who knows if Star bucks bring innovative products and market plan? At the moment there are competitions for coffee products through out the world. There are reports some companies doing research to introduce other beverages specially tea due to health benefits. We must not forget outstanding managers can change future of the company.
For example I recently found a company in an emerging country. They are doing a poultry business (Chicken) with good brand name. They have successfully faced the competition not only with local companies but also with well established foreign company who are leaders in the animal and poultry farm sector. They implemented some innovative ideas and started join- venture subsidiary with European foreign partner. Despite higher animal feed cost they were able to increase their earnings with return of investment more than 20%. Their debt level is lowest in that sector and planning to reduce cost further by producing animal feed (maize) locally. In addition they are hoping to export their products and currently there is a good demand for their products. So Intelligent investors have realized the potential of the company and now there is a good demand for their shares. This turn around company has become an outstanding growth company and recently one broker came with research report.
196 points
TeekaTiwari answered 11 months ago …
Actually quite a bit. Dairy prices, sugar prices and coffee prices are all moving higher. McDonalds, Dunkin' Donuts and a host of other competitors are finally getting in on the specialty coffee kick and are taking a bite out of their market share. Now, with all that said, at the right price, I would be a buyer of Starbucks. If I saw the PE (Price earnings ratio) drop off to the 15 x earnings level, I would probably step in. They still have a fantastic global franchise, but while commodity prices are on the rise, their growth rate looks to be more muted than in previous years.
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508 points
John answered 11 months ago …
I think the verdict is still out on Star bucks. The stock has been in a downturn for over a year. They expanded to much and now their overpriced beverage is being sold in places where the economic slowdown will cause some to cut back. Dunkin Donut's new found fame and cheap prices is killing bucks. Any further slowdown or raise in unemployment and Start Bucks may be ready for a new round of issues.
McDonald's revamped coffee beverage line has done exceptionally well for a significant cheaper price. Maybe SBUX can keep expanding customer base or maybe people are finally not willing to overpay for coffee.
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