2010 was a good year for Starbucks
With a P/E ratio of 21.4 on 2011 estimates, Starbucks' stock isn't cheap, and the market has great expectations for the company. Higher coffee and other input prices could pressure earnings. The company selectively increased drink prices in September, but additional margin-protecting increases in 2011 could be difficult for consumers to swallow, especially if disposable income is squeezed by rising gas prices.
Starbucks is also battling Kraft
The longer view
Despite the potential bumps in the road in 2011, there is much to be bullish about. The company has improved the economics of its retail stores and has adopted a more rational approach to store growth. Further expansion in China is a big opportunity, and VIA generated $135 million of sales in its first year despite being a late entrant into the single-cup market.
Starbucks founder Howard Schultz is back at the helm and has significant financial and reputational skin in the game. Finally, the company has demonstrated a willingness to return cash to shareholders through buybacks and dividends. (Click here to see what Fool Alyce Lomax had to say today about Starbucks' logo change.)
While it's always sweeter to buy when the market puts a company on sale, I wouldn't rule out buying Starbucks at a today's prices. If the company's comeback parallels the comeback that McDonald's staged over the last decade, long-term investors won't be disappointed.