Remember when Starbucks (Nasdaq: SBUX ) hit $62 per share? Well, the coffee giant's shares have hit a speed bump since then, giving potential investors a great opportunity to buy at a more reasonable price. Here are three reasons you should think about buying Starbucks shares right now.
Compelling growth initiatives: Starbucks isn't resting on its caffeinated laurels. Its Evolution Fresh juice-bar concept has great potential. Its recent acquisition of the Franco-influenced La Boulange bakery also adds a stronger brew for investors, since Starbucks has never been renowned for its food options and La Boulange will import some strong culinary experience into the mix.
Both of these initiatives differentiate it further from companies like Peet's (Nasdaq: PEET ) , Caribou (Nasdaq: CBOU ) , and Green Mountain Coffee Roasters (Nasdaq: GMCR ) , and allow it to start dabbling in the realm of Panera Bread (Nasdaq: PNRA ) . Peet's focus is really on the ultra-high end coffee market, Green Mountain's big diversifier is its Keurig machines -- not a good basket to be in now -- and Starbucks is actually more diversified than Panera now because it has packaged goods in its quiver as well.
Proud to be American: The recent drop in Starbucks' shares has related to fears about European weakness; many investors also tend to anchor on Starbucks' potential in Asia. I'm more bullish on Starbucks' strong role right here at home. Starbucks founder and CEO Howard Schultz has taken some strong stands on the political scene here in the U.S., and the company recently awarded some much-needed business to a manufacturing plant in Ohio.
Want to buy American? Check out this NPR story about Starbucks' deal with Ohio-based American Mug and Stein and purchase one of Starbucks' made-in-the-USA. Indivisible mugs. Oh, yeah, and then think about buying Starbucks shares, as Howard Schultz described this American manufacturing deal as "only the beginning."
Price: Starbucks shares are currently trading at 23 times forward earnings. Believe it or not, that's cheaper than Peet's, which sports a forward price-to-earnings ratio of 28. Starbucks shares are pricier than Caribou (forward P/E of 20) and Green Mountain (forward P/E of 7), but Starbucks has a more stable outlook than tiny Caribou, and Green Mountain's serious challenges are almost too numerous to count right now.
Starbucks is expected to report 20% earnings growth over the coming years, so again, its price isn't particularly out of line. Its strong balance sheet and dividend make it a winner, too.
Those are three reasons Starbucks looks like a compelling buy opportunity right now. What do you think? Add your thoughts in the comments box below.
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