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Starbucks: A Latte More Growth to be Seen
6/6/07
6/5/07
6/4/07
6/1/07
Thursday, June 7, 2007
Okay, I've been a Starbucks Corp. (NASDAQ:SBUX)
fan from practically day one, and now, it is hard for me to make it
through the day without getting my "grande latte fix." I know far too
many other people like me to think that Starbucks is going to
disappear, despite how far and wide as it has grown in the U.S.
Regardless, some analysts say that Starbucks is too expensive, that its
growth has hit a wall. But this behemoth coffee retailer hasn't lost
its appeal in my eyes.
The company has more that 13,000 stores in 39 countries. While we've heard the cries that it can't continue its impressive growth, and while headline business news recently covered CEO Howard Schultz's leaked internal memorandum expressing concern that the brand needed to return to its coffee roots, I think there is still upside in this pricey stock. It intends to ultimately build to 40,000 stores, half of which will be out of the U.S., as well as plans to add lunch and breakfast offerings.
Go abroad and you'll see practically everywhere has a Starbucks. I was in Switzerland last week, and the lines were out the door and the prices were so high (yet acceptable to the Europeans), I am sure that Starbucks is enjoying improving margins globally.
A friend of mine recently sold a book to a publisher -- his true story about hitting rock bottom and having his life turn around for the better by working at Starbucks; the U.S. publisher apparently then quickly sold rights to Korea, the U.K., Brazil, Russia, Taiwan and Australia, among other countries, all of which are territories where Starbucks is making a play, and all of which clearly are banking on the people in their respective countries being eager to read an inspirational story about their favorite coffee shop. (Not only that, but Tom Hanks then signed on to play the lead in the movie adaptation of the book, which can't hurt Starbucks if the film eventually gets made!). Now, for most all of us, Starbucks doesn't mean a movie deal -- but I can personally say that lots of happy moments occurred and important decisions were crafted while sitting in a Starbucks.
This is a hot coffee store, and if the book anecdote doesn't quite prove it to you, all you need to do is travel abroad and observe the lines at Starbucks internationally. The global growth is still going strong, and I think despite what others may say, this stock is under-priced still.
Second quarter results show net revenue up 20%. In New York, where I live, I keep thinking, "How possibly can another Starbucks open in this ten block radius?!?" but financial results also show that Starbucks is able to grow while keeping same store revenues at existing stores moving forward. I'm a huge fan of visionary Howard Schultz's management style, his excellent treatment of his employees, and his socially conscious philosophies. The leaked memo earlier this year did not raise flags for me at all. Instead, it indicated to me that here was a guy who was not getting complacent. He was and is actively involved in keeping his brand strong.
Type of stock: A leader in the specialty coffee retail world, I think Starbucks still has much more room to grow in price – regardless of the naysayers who see Starbucks as overpriced.
Price target: Currently trading at $28.50, well below its 52-week high of over $40. I think this is a great entry price to buy into SBUX's stock. If you can stand a little risk, hang onto it even as we go for a wild ride in the next months as the lofty stocks markets globally correct and then recover. We may see SBUX going into the $50s as we head into 2008.
hilaryonstocks at 12:23:00 PM EDT Blog about this entry |
Add to del.icio.us | 
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Starbucks: A Latte More Growth to be Seen
The company has more that 13,000 stores in 39 countries. While we've heard the cries that it can't continue its impressive growth, and while headline business news recently covered CEO Howard Schultz's leaked internal memorandum expressing concern that the brand needed to return to its coffee roots, I think there is still upside in this pricey stock. It intends to ultimately build to 40,000 stores, half of which will be out of the U.S., as well as plans to add lunch and breakfast offerings.
Go abroad and you'll see practically everywhere has a Starbucks. I was in Switzerland last week, and the lines were out the door and the prices were so high (yet acceptable to the Europeans), I am sure that Starbucks is enjoying improving margins globally.
A friend of mine recently sold a book to a publisher -- his true story about hitting rock bottom and having his life turn around for the better by working at Starbucks; the U.S. publisher apparently then quickly sold rights to Korea, the U.K., Brazil, Russia, Taiwan and Australia, among other countries, all of which are territories where Starbucks is making a play, and all of which clearly are banking on the people in their respective countries being eager to read an inspirational story about their favorite coffee shop. (Not only that, but Tom Hanks then signed on to play the lead in the movie adaptation of the book, which can't hurt Starbucks if the film eventually gets made!). Now, for most all of us, Starbucks doesn't mean a movie deal -- but I can personally say that lots of happy moments occurred and important decisions were crafted while sitting in a Starbucks.
This is a hot coffee store, and if the book anecdote doesn't quite prove it to you, all you need to do is travel abroad and observe the lines at Starbucks internationally. The global growth is still going strong, and I think despite what others may say, this stock is under-priced still.
Second quarter results show net revenue up 20%. In New York, where I live, I keep thinking, "How possibly can another Starbucks open in this ten block radius?!?" but financial results also show that Starbucks is able to grow while keeping same store revenues at existing stores moving forward. I'm a huge fan of visionary Howard Schultz's management style, his excellent treatment of his employees, and his socially conscious philosophies. The leaked memo earlier this year did not raise flags for me at all. Instead, it indicated to me that here was a guy who was not getting complacent. He was and is actively involved in keeping his brand strong.
Type of stock: A leader in the specialty coffee retail world, I think Starbucks still has much more room to grow in price – regardless of the naysayers who see Starbucks as overpriced.
Price target: Currently trading at $28.50, well below its 52-week high of over $40. I think this is a great entry price to buy into SBUX's stock. If you can stand a little risk, hang onto it even as we go for a wild ride in the next months as the lofty stocks markets globally correct and then recover. We may see SBUX going into the $50s as we head into 2008.
hilaryonstocks at 12:23:00 PM EDT Blog about this entry |
Add to del.icio.us | digg this
6/16/07 10:43 AM
Any thoughts about SBUX getting rid of their monthly same-store sales? Does that add any extra risk in your mind?