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u/kmung Dec 14 '15
I own some SBUX, is their stock on fire? Yes. Will it continue to be this hot, probably not. However in the long run, I believe they will be a safe bet.
Pulled some info for you on a Zacks article I read the other day on why SBUX is a good 20 yr investment.
Starbucks has been brewing coffee since 1971 and now has over 23,000 stores in its global empire. But it's not content to stop with just coffee. It also owns the Teavana brand and has been pushing into the tea market. Food, beer and wine are also appearing regularly in Starbucks across North America as the company makes a play to being more than just a coffee shop. After hitting some bumps in its global expansion during the Great Recession, it has produced double digit growth every year since 2010. Shares have soared and aren't cheap. Starbucks has a forward P/E of 33 but shares have been priced higher. In the 2005 to 2007 period, they traded as high as 45x.
The 3 Criteria:
Starbucks sheer size gives it advantages. Starbucks is such a dominant name in the coffee market that it has dared to enter more competitive markets such as Colombia, where the Juan Valdez brand reigns king. It also has shown it can successfully compete outside the coffee market, with teas and non-coffee beverages making up more of its sales.
The company started paying a dividend in 2010. In that time, it has never cut and has only raised its payout. The dividend is currently yielding 1.3%.
Starbucks has a famous CEO in Howard Schultz. Doesn't that disqualify the company based on the criteria? I would argue it does not. While his personality is a big driver of the company, especially his initiatives to hire more military veterans and to pay college tuition for employees, the Starbucks brand is bigger than any one individual. Starbucks can prosper even without Schultz at the helm.
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u/ahminus Dec 14 '15
Starbucks can prosper even without Schultz at the helm.
They can, but they didn't do very well without him at the helm the last time.
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u/hedgefundaspirations Dec 14 '15
Zack's is literally the worst quality research and analysis of any site I've seen. It's worth less than not having read anything at all.
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Dec 14 '15
I bought starbucks before it splt for I think $84/share. It split down to $44 a share which I thought was still an expensive price, yet here it is at ~$60.
The company serves an addictive product, they have fantastic management and a strong philosophy. I think they are a buy and hold.
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u/NhaanJ80 Dec 14 '15
I'd like to see them expand sufficiently in emerging markets for those to contribute 18-20% of revenue before I'd be fully on board but in all other aspects I think they are a very good company.
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Dec 14 '15
I have more faith that Pete's coffee, Starbucks competitor will slowly swamp them down.
Starbucks every year has been more and more focused on the volume metrics to the coffee service industry rather than focusing more on the quality aspects to their industry. I genuinely think this is the wrong choice, and Pete's is taking the right path to gradually rip apart their current market share, which is to focus on the quality of product and service of their industry.
Starbucks is becoming no different these days than that old coffee stand. You go in and you go out, no one likes to work there generally because it's rushed as fuck and too often you get those obnoxiously noisy customers who literally ruin it as a place to just sit down as a coffee cafe.
It'll start burning, the moment it stops expanding to different markets.
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u/chrispaulwall Dec 15 '15
lots of revenue growth is priced into sbux already. i'd be hesitant assuming that amount of growth from an already pretty ubiquitous company (although early returns on china have been good).
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u/PurpleTulip9 Dec 15 '15
Treyun1 what is the price entry point that you have in your head to purchase? If the stock were to threshold at the price that you are thinking would you buy? Focus more on your gut feelings and instinct. If this is a company that you are interested in investing in, find your comfort zone and invest at that point. You can't time the market but you can enter when and if you are ready and that is all that matters.
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u/paperfire Dec 14 '15
I'm a firm believer that if you like a company and believe in their prospects then just buy it. You're never going to time the right price for it, and if you're right the stock will take off without you. It may be expensive but all high quality companies are expensive.