Should I sell my Starbucks?
Best Answer
118 points
HardOpinion answered one year ago …
As with any stock, it depends on why you bough, when you bought and whether you think the stock has a chance of good recovery and therefore profit.
As some of the other responders to this question have said: Consumers are cutting back, so $4+ coffee will be much lower on their spending list. Some will still buy, but only one a day instead as I have seen , 2 or 3 a day. The coffee isn't that great and I think Pike's Place is awful.
Shultz when he took over the reins again, said that SBUX had moved too far away from it origins as a coffee shop, a place where people go to socialize as well get a coffee. Yet here we are with the introduction of Smoothies - which taste disgusting, reasonable without the protein powder added - just! Now having canceled the idea of serving hot breakfast sandwiches - because it would detract from the smell of fresh coffee? - they are about to introduce "breakfast sandwiches!" Many stores are currently under going training and here's the thing that make me cringe - having stopped the installation of ovens in stores earlier in the year and in some cases removed them from stores - they are putting the things back!!! Cut backs on the one hand to save money and what must surely be waste on the other.
Will the recent management restructuring help? Probably not unless staff morale is boosted, store managers are are appointed for their management abilities rather than just because they have been there a while and somebody gets to grips with the staff training. Somebody reading from a manual doesn't make for effective or efficient training. Corporate ordering nationwide store closures for training is okay, but don't then charge the cost against the individual store managers budget - that plus a reduction in sales due to the economy means most store managers will not come any where close to getting their targets, so no bonus. How's that for killing morale - pee'd off managers in my experience don't make good store staff motivators which then reflects in lower than expected customer service standards, which translates frequently into lower sales because customers will go elsewhere.
SBUX has a lot of work ahead of it at the store level, but I'm not sure the senior management are aware of just how much. Are they really a coffee shop as per the original Starbucks concept or they just another fast food joint like Dunkin and MacDonalds - but with pricier coffee?
My opinion for what its worth - don't hold your breath waiting for the stock to rebound anytime soon - until somebody takes long hard look at the ground floor and then defines what's really wrong with SBUX and clearly identifies what business they are really in, the stock will languish at current or lower levels for quite some time.
Answers
631 points
Creezy answered one year ago …
That's a GREAT question. Here's why...
Historically speaking, this stock looks extremely oversold, it hasn't been this low in 5 years. It's trading at a mid-teens P/E ratio, which is always a good sign, IF you think the company's business will stay as is (or even improve). But from where I'm sitting it doesn't look like things will stay "as is" over at SBUX.
Cutting 1,000 employees, closing stores, COO gone, etc. It doesn't sound like a company that's doing well and just being oversold by the market. It sounds like a company that's going to have to slog through a tough economy and try to come out leaner and meaner once the overall situation in this country improves.
The thing with Starbucks is it's always going to be one of those "little extras", not a necessity. So if people have a few less dollars in the bank, they're not going to continue to spend what they do have on an overpriced cup of coffee (that quite frankly, isn't as good as it used to be). Especially if this is the same morning commute crowd that's now paying twice as much in gas/fuel costs to get to work.
So if you're a long term SBUX holder (i.e. own it cheaper than where it's trading now), you might want to hold out. But if you bought it recently, you might consider cutting your losses.
Not a recommendation or anything, but that's just what I'd do.
251 points
MichaelShulman answered one year ago …
Barry Diller, the CEO of the ultimate consumer discretionary spending company InterActiveCorp (IAC) -- which is into home shopping, travel and concert bookings, to name a few -- said the consumer is done after Labor Day.
From where I sit (which is right in front of our latest ChangeWave Alliance Consumer Spending survey), the U.S. consumer is already done.
We've been playing the short-side of Starbucks by buying long-term put options for the coffee purveyor since April, and I expect the position to make "Venti-sized" profits for us.
197 points
whiteshadow204 answered one year ago …
If this is something you've had for a long time and just holding, I'd recommend selling covered calls every month. You could pick strike prices based on how badly you actually want to sell, and how the market has been performing. Best case cenario is you are recouping some of your losses. Worst case is you sell it, which you are thinking of doing anyway.
Personally, SBUX has been looking like a bargain to me since it went below $14 last month. I think we're in a short rally in a long-term down trend in the market, so the next several quarters could possibly see it drop more. (Although unlikely in the next month or so) Since it looks like a good buy to me, but I'm somewhat undecided, I've started selling naked puts. If we do see it trading in the $10-$12 range in the next year or so I'll definitely be a buyer.
My opinion is the stock won't trade much lower than this if at all. (Although I'm certain this bear market has not bottomed) It would be a shame for you to sell at the lowest price. I don't see SBUX making all-time highs again any time soon, but in a different market it's still a $25 or $30 stock. (IMO of course)
103 points
Republican answered one year ago …
I truly believe that the glory days are gone for good at SBUX. I give credit to SBUX for creating a market. The generation they captured had stopped drinking coffee. Then along came a $4 cup of coffee and everybody was hooked. They owned the market - they were the only game!
Alas, here comes the competition! Caribou, Dunn Bros. on the high end, Dunkin Doughnuts at mid range and McDonalds on the low end. It was a different world. More importantly quality entered the picture. As Creezy has offered, the coffee isn't as good as it use to be. I personally prefer Caribou.
The coffee is only one part of the tough climb they are facing. The cold drinks, the smoothies, etc., are not as good as the competition. Can they come back? I don't think so.
