by winston » Thu Jun 16, 2016 10:02 am
not vested
Consumer Stocks to Buy Now: Starbucks Corporation (SBUX)
It’s hard to believe, but Starbucks Corporation (SBUX) stock is down 7% year-to-date through June 15. It hasn’t had a down year since 2008 when it lost 54% of its value on top of a 42% decline the year before.
Young investors probably don’t remember that CEO Howard Schultz, so synonymous with the brand, wasn’t actually running the company when it ran into trouble back in 2007.
At the time of the decline, former CEO Jim Donald was under control, having been promoted to the job in 2005. By January 2008, Starbucks’ board had seen enough, asking Schultz to return to the top job. Schultz promptly got to work fixing the Starbucks experience.
While there have been bumps along the way, including this year’s revamping of the Starbucks loyalty program, the results of his handiwork speak for themselves. SBUX stock is up 24.8% on an annualized basis since Schultz took back the CEO title.
It’s hard to argue with success. But it’s the future that investors are concerned about.
Well, as it continues to rollout beer and wine across the country and in Canada too, its solution for the slowest daypart in the company’s business strengthens by the day. It’s called proactive management.
Barron’s just came out with a very favorable article about Starbucks’ same-store sales that suggests it will continue to deliver mid-to-high-single-digit growth at its locations open for more than a year. The paper found Starbucks had lost no business due to the changes in its loyalty program. Not a surprise, really.
They simply made the program fairer. On the grocery shelves, it’s also kicking butt and taking no prisoners and in the process, capturing market share. With its deal to sell coffee pods for the Nespresso home brewing machine made by Nestle SA (ADR) (NSRGY), Starbucks gains a foothold in the European brew-at-home market.
Look no further than its Q2 2016 results for assurances that Starbucks still has growth ahead of it. In the second quarter, it generated a record $5 billion in revenue and $864 million in operating income. It expects to open 1,800 net new stores in fiscal 2016, all of which are going to help generate the estimated revenue growth of 12% year-over-year.
Operating margins are expected to increase slightly leading to an estimated non-GAAP fiscal 2016 earnings per share of at least $1.88. That’s a forward price-to-earnings ratio of 29.
You might not like paying this type of multiple, but sometimes it’s okay to pay up for quality. When it comes to consumer stocks, you’re not going to get any better.
Source: Investor Place
It's all about "how much you made when you were right" & "how little you lost when you were wrong"