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- While my previous article used the Dividend Discount Model to yield a price target of $101, the Capital Asset Pricing Model suggests an even higher target of $137.
- When compared to Dunkin' Brands Group and McDonald's Inc. to Starbucks, we see that Starbucks is the only company with its daily return meeting its expected return.
- With a beta of 0.95 and an R-Squared value of 28.74%, the company overall has less risk characteristics relative to the broader market.
- SBUX's flagship location in Chengdu is part of its aggressive China growth strategy.
- Localization of menu and storefront will be important to attract traffic.
- Maintaining supplier integrity and quality will be key priorities.
- Starbucks is one of the few in-store retailers that we'd take a chance on. Otherwise we're bearish on retail.
- Starbucks is going to transform into more than just a coffee shop.
- We think there's long-term potential.
Starbucks: Recently Announced 5-Year Plan Looks Great, But...
- The company plans to push further into the tea market and offer more consumer food products in supermarkets.
- The company plans to expand their food offerings and alcoholic beverage offerings into more stores to expand revenue during the quiet lunch and evening periods.
- The company’s announced mobile order and pay process will allow customers to place orders in advance of their visit and allow for food and beverage delivery in select areas.
- A prospective SBUX investor should either wait for a pull back in the company’s shares or average into a position in SBUX shares in set dollar amount increments.
- A history of substantial dividend increases will reward SBUX shareholders as SBUX's initiatives continue to unfold.
- I came away positive after attending SBUX investor day where the company clearly outlined its 5-year growth plan.
- Expanding services (i.e. mobile pay, mobile order, food delivery) and derivative food/beverage (i.e. wine/beer, tea, lunch) will drive domestic growth.
- China and India will drive growth post 2019 when North America is expected to hit maturity.
- SBUX detailed a five-year plan to get to $30 billion in revenue.
- Some of the (quite interesting) details suggest maybe even the $30 billion target is conservative.
- What would $30 billion in revenue translate into EPS?
- And does that EPS, along with a five-year discount rate, make SBUX under or overvalued?
Location, Location, Starbucks... A Different Approach To Real Estate Investing
- Would we be right in categorizing McDonald's as a real estate company? What about Starbucks?
- Is Starbucks using the same model for choosing locations as McDonald's?
- Can we profit from Starbucks as a real estate company?
Starbucks Likely To Brew Significant Gains For Your Portfolio
- Starbucks offers compelling growth potential (estimated at nearly 18% annually), but the shares trade at a premium multiple (25 times forward earnings).
- The DRAG analysis investigates the company's fundamental attributes and views its strong competitive position, flexible balance sheet and increasing dividend as positive factors.
- The resulting calculation demonstrates that, based on this framework, Starbucks shares are currently undervalued by 25% and therefore represent an attractive investment opportunity in the consumer sector.
- Starbucks' mobile ordering - a way to squeeze more sales out of each of its outlets, keep same store sales growth humming along, and fatten profit margins.
- The company faces an aggressive schedule and there are plenty of logistical issues to work out.
- But the potential payoff for Starbucks is huge.
- This is the first of a 10 part piece where I pick 10 stocks for the long-run.
- Starbucks has a solid moat and will still be serving coffee 20 years from now.
- Starbucks still has big potential in tea, China, and in its digital efforts.
Starbucks: Quietly Becoming A Dividend Growth Powerhouse
- Revenues in the latest quarter grew, but not as much as investors had expected and the company’s share price dropped.
- Lost in the disappointing revenue growth was a 23 percent dividend increase and a tripling of SBUX’s dividend since 2010.
- The company is becoming a powerful force in the dividend growth category of stocks.
- The long-term plans and objectives of SBUX management remain intact and will reward current and future shareholders.
- Prospective SBUX shareholders should wait for the share price to pull back before establishing a full position.
Starbucks Stock Fails To Woo Investors Despite Top Line Growth
- Starbucks sales see growth, but fail to meet analysts’ forecasts. Consolidated net revenues increased by 10% to $4.2 billion with a consolidated operating income of $854.9 million this quarter.
- Starbucks continues to exploit its innovative tradition and raised prices on its products. It was able to realize more revenue through raising prices.
- It plans to launch a nationwide delivery service based on a mobile app. This initiative carries a lot of potential but also carries some evident risks.
- Recovering world economy is likely to boost consumption expenditure in the future which could be seen as an opportunity to generate more sales.
- The coffeehouse company’s stock will not likely see any vertical growth anytime soon.
- While some were disappointed with Starbucks’ Q4 report, we are encouraged by the company’s strong and consistent sales growth.
- Starbucks is going mobile—pushing new frontiers of e-commerce in the food and beverage industry.
- The company proved resilient to a Q3 price hike; customers are apparently loyal.
- With feasible strategies for growth on the horizon, both domestically and internationally, we are optimistic on the company and stock as 2014 comes to a close.
- Starbucks released Q4 earnings on October 30.
- Dunkin' Brands released Q3 earnings on October 23.
- Both stocks reacted by moving to the downside.
- Which company had the better quarter?
- Starbucks 2.0 could be a major tailwind for sales and earnings growth going forward.
- SBUX is expensive but if the company can execute on mobile initiatives $75 could turn out to be a great buying opportunity.
- Innovation and a rabid customer base means that while SBUX is expensive, I'm getting bullish here.
- SBUX Q3 print was weak with EPS in-line but revenue missed on weaker comp.
- Mobile POS, smartphone app and food delivery should enhance overall quality of service.
- China/APAC still under-penetrated. Reiterate my bullish view on the stock.
Tue, Jul. 8, 9:12 AM
- Coffee prices continue to retreat from their highs as improved weather in Brazil and strong output in India pushes up estimates on global output for the robusta and arabica varieties.
- Many coffee sellers have already lifted retail prices (KRFT, SBUX, SJM, DNKN) and could see a benefit if their purchasing contracts get locked-in at lower levels.
- Related ETFs: JO
Mon, Jul. 7, 8:03 AM
- Starbucks (SBUX) is positioning itself to boost its dividend significantly within the next six months, according to Belus Capital's Brian Sozzi.
- The company also landed on a short list from Markit Dividend Research of the S&P 500 companies most likely to raise their dividend payout rate in the second half of the year.
Mon, Jun. 30, 7:07 AM
- A jump in beef prices has restaurant operators scrambling to avoid taking a hit on margins this year.
- While Chipotle has been able to pass on higher input costs to consumers, most chains are seeing consumer push back on price hikes.
- A new twist" Fast-food chains Carl's Jr. and Hardee's have introduced smaller-sized sandwiches to its menu to try to keep profits intact.
- Related stocks: CAKE, CBRL, CMG, DPZ, DRI, EAT, JACK, MCD, PNRA, RRGB, RT, SBUX, SONC, WEN, BWLD, THI, BDL, NATH, LUB, BKW, CHUY, BLMN, PZZA, TXRH, DENN, KKD, BBRG, DFRG, BOBE, RUTH, IRG, DIN.
- Previous: Beef prices could pressure restaurant margins
Fri, Jun. 20, 12:30 PM| 5 Comments
Thu, Jun. 19, 2:26 PM
- UBS raises profit estimates on Starbucks (SBUX +2%) for FY14 ($2.67 from $2.65) and FY15 ($3.16 from $3.11).
- New initiatives, product roll-outs, and global growth channels all look set to deliver as promised, reasons the investment firm.
- UBS on SBUX: "Starbucks remains among the best positioned restaurant names over the medium to long-term, with several enablers supporting a +10% top line, +15- 20% EPS growth."
Tue, Jun. 17, 6:57 AM
- Coffee output in India is forecast to rise after suffering a setback last year.
- Higher production from the region could increase global supply to pressure prices after a drought in Brazil has had major impact on the coffee market.
- Prices on bagged coffee has been increased by a wave of companies including J.M. Smucker and Kraft Foods.
- Wholesale coffee prices still have a big wildcard in the mix with the emergence of El Nino.
- Related stocks: SJM, KRFT, THI, SBUX, GMCR, MCD, JVA, KRFT, DNKN.
- Related ETF: JO
Thu, Jun. 12, 8:24 AM
- Starbucks (SBUX) is expected to announce today a national roll-out of wireless charging stations at its stores and Teavana outlets.
- The company is partnering with Duracell Powermat (PG) on the initiative.
- The marketing mavens working for Starbucks say the strategic move to eliminate the power cord in the charging process will strengthen the reputation of its brand as tech-friendly.
Wed, Jun. 11, 3:23 PM
- Execs with Starbucks (SBUX +0.3%) presented today at the William Blair & Company Growth Stock Conference
- EPS growth of 20% to 22% is forecast.
- The company expects to have 1.5K stores in China by the end of the year.
- Sales have improved at every 2-hour interval of the day with the 11:00 a.m.-1:00 p.m and 1:00 p.m.-3:00 p.m. windows showing the strongest pace of comp sales gains.
- Offering beer and wine at stores has lifted the average ticket level at participating stores.
- CFO Scott Maw notes tea is a bigger market than coffee and is growing at a faster pace. Tea opportunities could broaden as tea concept stores in the U.S. draw notice.
- "Significant innovation is on the docket," says management. Look for the trend of 1% to 2% of comp growth from innovation to continue at Starbucks.
- Express ordering via mobile app is on the agenda. Testing is ongoing.
Wed, Jun. 11, 2:11 PM
- A new coffee service app from an Israeli start-up did a soft launch in New York City with positive early results.
- The $45-per-month Cup service gives subscribers unlimited purchases of basic coffee and tea drinks at the 40 participating independent shops. A premium service at $85 per month opens the door for premium espresso and latte drinks.
- Both Starbucks (SBUX -0.4%) and Dunkin' Brands (DNKN -0.6%) have 10X the number of locations that Cup has under its fold so far.
- The firm's goal is to expand out of NYC in the future.
Wed, Jun. 11, 1:57 AM
- The European Commission is preparing an investigation into the corporate tax codes in Ireland, Luxembourg and the Netherlands. The probe is examining the low tax rates global companies pay in the three countries, and will make known if their tax deals are allowed under EU law, or amount to illegal state aid.
- If the investigation reveals that multinational corporations received the state aid, the commission could obligate them to pay it back, even though such requirements are uncommon.
- The probe comes after yesterdays news that Apple used Irish tax laws to allow it to pay just a 3.7% tax rate on non-U.S. income during its last fiscal year. Other companies that will be investigated include Amazon (AMZN), Google (GOOG, GOOGL) and Starbucks (SBUX).
Mon, Jun. 9, 1:46 PM
- Data from NPD Group indicates the average American spends 12 minutes a day on breakfast.
- The highly-contested daypart pits major cereal sellers such as Kellogg (K), Post Holding (POST), and General Mills (GIS) against fast-food chains like McDonald's (MCD), Starbucks (SBUX), Taco Bell (YUM), and Dunkin' Brands (DNKN).
- Convenience-store chains are also a major factor as C-stores such as Circle K (ANCUF), 7-11, Pantry (PTRY), BP Connect (BP), On the Run (XOM), Speedway America (MPC), Kwik Shop (KR), and Qwiktrip continue to innovate and show some positive growth trends.
- What to watch: Analysis from Edward D. Jones suggests consumers tend to stay with their routines. The read is that companies in the breakfast business need to compete for market share within their segment - instead of trying to change consumer behavior. Taco Bell is utilizing that strategy with its marketing message which paints McDonald's as old-fashioned.
Mon, Jun. 2, 11:34 AM
- Improved traffic at restaurants chains in April helped boost the Restaurant Performance Index monitored by the National Restaurant Association by 0.3% to 101.7.
- The Expectations Index, which measures the six-month outlook for operators, improved 0.2% to 102.2 to mark the highest level for the index in two years.
- Restaurant stocks: CAKE, CBRL, CMG, DNKN, DPZ, DRI, EAT, JACK, MCD, PNRA, RRGB, RT, SBUX, SONC, WEN, BWLD, THI, BDL, NATH, LUB, BKW, CHUY, BLMN, PZZA, TXRH, DENN, KKD, BBRG, DFRG, BOBE, RUTH, IRG, DIN
Wed, May. 28, 9:09 AM
- Standpoint Research is out with Strong Sell ratings on Starbucks (SBUX), McDonald's (MCD), and Wal-Mart (WMT) on moral grounds.
- Analyst Ronald Moas has made a lot of noise on the issues of wealth redistribution and the unfair treatment of employees by corporate giants, but his rants have done little to move stock prices.
Tue, May. 27, 11:26 AM
- Starbucks (SBUX +2%) will open the doors to a fast-casual La Boulange restaurant in Los Angeles on June 12.
- The company already runs several La Boulange restaurants in San Francisco with early reviews largely positive.
- The outlet in L.A. will serve standard La Boulange fare until 7:00 p.m. after which time the menu will include croissant burgers, wine, and cocktails.
- The company hasn't been specific about the direction of the La Boulange brand. "You will see us experiment with La Boulange through various brand extensions," teases one Starbucks exec.
Tue, May. 27, 8:13 AM
- India's largest coffee chain with 1,650 outlets (and another 350 on the way), Cafe Coffee Day has begun interviewing investment bankers, reports Bloomberg, and could seek a valuation of about $1B. The offering could help the company extend its market share lead in India over rivals like Starbucks (SBUX) which opened its first store in that country less than two years ago.
- KKR invested in Cafe Coffee's holding company - Amalgamated Bean - in 2010.
Fri, May. 23, 11:05 AM
- Wells Fargo analyst John Baumgartner forecasts a continued drop in milk prices after seeing Class I milk peak earlier in the month.
- The news could be a relief for a number of companies (DF, WWAV, SJM, DF, NSRGY, LWAY, DNKN, MCD, SBUX, GIS, HSY, MJN, ADY) which have faced margin pressure over the escalated cost of wholesale milk products.
- Milk price chart
- Related ETF: MOO
SBUX vs. ETF Alternatives
Starbucks Corp is the roaster, marketer & retailer of specialty coffee in the world, operating in 65 countries. It sells a variety of coffee & tea products. It sells goods and services under brands under Teavana, Tazo, Seattle's Best Coffee, etc.
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