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The Starbucks Reserve Roastery, More Than Just A Pretty Face
- Starbucks Reserve Roastery is more than just a coffee theme park.
- Increased production capacity will roughly double production of Starbucks Reserve blends.
- Roastery is critical to Starbucks' forward strategy of product diversification.
- SBUX continues to be a Best Idea short.
- Is SBUX seeing similar pressure to DNKN?
- Call me crazy, but it isn’t clear that Starbucks is immune to some of the softness Dunkin’ is facing.
- 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.
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
Thu, May. 22, 1:15 PM
- Jamba (JMBA +3.9%) is rapidly accelerating the rollout of its fresh-juice initiative in order to stay ahead of rivals - in particular Evolution Fresh (SBUX).
- The company says 500 locations will have the fresh juice platform in place by June 2 and all stores will be covered by 2015.
- Consumer response has been very positive to Jamba's juicing pilot program, with participating stores showing a 3%-4% lift to their comp. Execs with Jamba are convinced they are catching a wave early.
Tue, May. 20, 10:21 AM
- Amazon (AMZN +1.7%) trades higher amid a tough day in retail.
- There's nothing concrete on the table, but some analysts think the company has been stealing some market share from major retailers in Q1 and Q2 as consumers continue to evolve their shopping habits. Staples (SPLS -10%) and Office Depot (ODP -1.5%) come to mind.
- Starbucks (SBUX -1.3%) CEO Howard Schultz seems to have called the retail slide with his perception that a "seismic shift" toward online and mobile is beyond the tipping point (FBN interview, SBUX conference call).
- Related ETFs: XLP, XLY, VDC, XRT, VCR, RTH, RETL, FXG, IYK, IYC, FXD, SCC, FDIS, UCC, RHS, PMR, FSTA, RCD, UGE, PSL, PEZ, PSCC, PSCD, SZK
Wed, May. 14, 11:25 AM
- Coffee prices could be driven higher later this year due to high demand for premium beans and a tight supply as a result of a harsh drought in Brazil.
- The International Coffee Organization forecasts H1 coffee production will be down close to 5%.
- The wildcard: An early outbreak of El Nino could also disrupt crops across South America.
- What to watch: Starbucks (SBUX), Tim Hortons (THI), McDonald's (MCD), and Keurig Green Mountain (GMCR) could get pinched if coffee prices push significantly higher. Analysts note not all of the input costs can be passed off to consumers and hedging strategies weaken above a price level of $3/pound.
- Related ETF: JO
Wed, May. 14, 7:55 AM
- SodaStream (SODA) is in focus after a stumble in the U.S. drives home that the company is having some trouble penetrating the region to the same degree as other markets.
- Guidance from SodaStream is for a FY14 revenue to increase by 15% to $647.11M vs. $639.3M consensus.
- The company sees FY14 net income improving by 3% Y/Y to $42M.
- What to watch: Weakness by SodaStream in the U.S. is almost sure to drive out more speculation on a major beverage player buying out the Western Europe juggernaut. Pepsico (PEP) and Starbucks (SBUX) top the list.
- SodaStream earning call webcast 7:30 EST.
- SODA -3.3% premarket
Tue, May. 6, 1:34 PM
- Restaurant chains saw sales increase at a slightly higher rate last year than sales at independent chains and concepts, according to data from GE Capital.
- The 100 largest chains saw sales grow at a rate of 3.5% vs. the industry average of 3.1%.
- Consumers spent more money per restaurant visit in 2013, but industry-wide same-store sales fell off 0.1% with traffic numbers down.
- For the 6th year in a row, sales at quick-service restaurants rose faster than sales at full-service establishments.
- 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, Apr. 30, 2:55 PM
- Starbucks (SBUX) rolled out Oprah tea products this week at 12K of its branded stores in the U.S. as well as the 300 Teavana stores it has opened. Early channel checks indicating strong interest from consumers.
- Tea is the next frontier for Starbucks and some analysts think the Oprah phenomenon gives the initiative a fighting chance.
- Sales of tea in the U.S. grew from $1.84B in 1990 to $10.41B in 2013, but proponents think the market still has huge upside - especially in the premium segment.
- A possible catch in the plan can be summed up in one word. Caffeine. If consumers find tea a contemplative drink, instead of a daily craving they need, Starbucks could see slower demand for tea drinks and products than forecast.
Tue, Apr. 29, 10:35 AM
- Starbucks (SBUX -0.6%) launches the Teavana Oprah Chai Tea brand today in stores in North America.
- The company says Oprah Winfrey personally developed the multiple Chai tea flavors.
- The big picture: Starbucks spent $620M on a big bet that it could develop tea-only stores in the U.S. and bring in new tea adherents. During the firm's Q1 conference call (transcript) Teavana was a big topic of discussion, although execs were light on details on sales. The launch of the Oprah brand and Teavana stores should give investors more insight in the near future on the demand trends for tea in North America.
Mon, Apr. 28, 2:51 PM
- The restaurant industry is watching with interest a late push by waiters and bartenders in Seattle to drum up support against a proposed $15-per-hour minimum wage law in the state.
- The group fears a minimum wage law hike will significantly lower the level of tips servers receive from customers.
- The big picture: The potential for minimum wage increases - either on a federal level or state by state - has been a hot topic in dissecting restaurant stocks. Some analysts see a significant bottom line pinch as companies have a difficult time passing on the extra costs to consumers in the form of higher prices.
- Related 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.
Mon, Apr. 28, 1:03 PM
- Single-serve brewing system sales rose 8% last year to $930M, although some key markets showed signs of saturation.
- Retail sales of single-serve brewing systems were flat in New York City, while they actually fell off in Washington, DC (-2%) and Boston (-3%).
- 19% of pod-based machine sales were online during the period.
- Related stocks: GMCR, SBUX
Mon, Apr. 28, 7:40 AM
- Coffee prices could keep rising as fresh estimates on Brazil's coffee harvest point to more weakness.
- Marex Spectrom expects a harvest in the 2014-2015 season of 49M bags vs. a prior forecast of 55M bags and 53.3M bags a year ago.
- Analysts say the Arabica supply situation is deteriorating due to harsh weather in Brazil
- Related stocks: SBUX, GMCR, JVA
- Related ETFs: JO
Fri, Apr. 25, 10:13 AM
- "The test is over," says Starbucks (SBUX +0.3%) CEO Howard Schultz, telling CNBC the company is plowing ahead with offering alcohol in its stores.
- In other news from the conversation:
- Fizzio is a key focus of his (SODA -2.9% in early action).
- While raw coffee prices are up 80%, they're just 10% of Starbucks' operating cost, and "If push came to shove, we have pricing power."
- Schultz gets a chuckle out of competitors who blame the severe winter weather for weak results.
- Last night's earnings coverage
Thu, Apr. 24, 4:24 PM
- Starbucks (SBUX) reports global comparable store sales increased 6% in FQ2 vs. 5% in FQ1 and 6% for the year-ago period.
- Comp growth was fairly consistent across regions: Americas and U.S. +6%; EMEA +6%; China/Asia Pacific +7%.
- Operating margin improved 130 bps to 16.6% on sales leverage gains and lower commodity costs (coffee was hedged).
- The company added 335 net new stores during the quarter.
- FY14 EPS guidance is increased to $2.62-$2.68.
- SBUX +0.9% AH
Thu, Apr. 24, 4:07 PM| Comment!
Wed, Apr. 23, 12:26 PM
- Starbucks (SBUX -0.9%) is in advanced talks to purchase 10% of SodaStream (SODA +11.5%), according to a report from Globes.
- The Israeli publication indicates the deal price could be at a 30% premium over SodaStream's market price.
- The spotlight turned to SodaStream after Coca-Cola and Keurig Green Mountain struck what could be a disruptive deal earlier this year.
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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