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Starbucks and Other Stocks on Super Sale

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This article is part of our Real-Money Stock Picks series.

It's been an interesting earnings season so far. Starbucks (Nasdaq: SBUX  ) landed in the camp of companies that presented quarterly tidings that disappointed investors due to global weakness and other economic factors.

Like Chipotle (Nasdaq: CMG  ) last week, Starbucks' quarterly results were good, just not good enough. Plus, Starbucks' forecast for next year was weaker than analysts' expectations due to macroeconomic conditions across the globe.

Starbucks' fiscal third-quarter operating income increased 22% to $492 million; earnings per share jumped 19% to $0.43 per share. Total revenue gained 13% to $3.3 billion, while global same-store sales rose a healthy 6%, including a 7% increase in the U.S.

Investor sentiment toward companies like Starbucks and Chipotle has been choppy recently. Starbucks and Chipotle may have disappointed investors who expected more, but Whole Foods Market (Nasdaq: WFM  ) blew the doors off and reported an incredibly robust quarter. Panera Bread (Nasdaq: PNRA  ) also reported an excellent quarter, which was met with a surge in its stock price.

Starbucks, Chipotle, and Whole Foods are all stocks I have purchased for the socially progressive real-money portfolio I'm managing for Considerable decreases in stock prices for both Starbucks and Chipotle simply signal a better time for investors to buy in, and those of us who already hold them -- and call ourselves long-term investors, not traders -- should count to 10 and remember not to sweat the short term.

Panera Bread is another stock I have occasionally eyed for the portfolio. I can't say its current price tantalizes me, though. I'm waiting for some temporary pessimism, similar to what has befallen Starbucks and Chipotle.

When it comes to Starbucks specifically, the stock's now trading at just 20 times forward earnings, and let's not forget, Starbucks has some interesting growth-oriented initiatives up its metaphorical sleeve. Evolution Fresh, La Boulange, the new Starbucks Refreshers product line, and a deal with Coinstar (Nasdaq: CSTR  ) to distribute its Seattle's Best Coffee through thousands of "Rubi" kiosks throughout the U.S. are among the interesting ways Starbucks is planning for the future.

Things may feel panicky for some companies right now, but smart investors will persevere -- and take advantage of price weakness to buy up shares of the best American companies.

Is Starbucks not your cup of tea, so to speak? Our analysts have dubbed one retailer "The Top Stock for 2012," and it's a stock you may have never heard of. Click the link for your free report.  

Alyce Lomax owns shares of Starbucks and Whole Foods Market in her personal portfolio. The Motley Fool owns shares of Chipotle Mexican Grill, Whole Foods Market, Panera Bread, and Starbucks. Motley Fool newsletter services have recommended buying shares of Whole Foods Market, Starbucks, Chipotle Mexican Grill, and Panera Bread. Motley Fool newsletter services have recommended writing covered calls on Starbucks. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On July 27, 2012, at 4:43 PM, assisgnmeaname wrote:

    Any retail investor who isn't wise enough to wait a quarter to reevaluate the CMG and SBUX story is indeed foolish. If you weren't savvy enough to sell, before the disastrous quarters maybe you hold, but why not just wait a few months to buy. Not sure where SBUX settles, but in any normal market conditions, CMG heads to the low $200's before it becomes interesting to any new investors...even there it will command a valuation that is richly above their peers. (I am short, though I covered half my position from the low $400's)

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10/24/2016 4:00 PM
SBUX $54.18 Up +0.55 +1.03%
Starbucks CAPS Rating: ****
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Outerwall CAPS Rating: **
PNRA $198.62 Up +1.76 +0.89%
Panera Bread CAPS Rating: ****
WFM $28.27 Up +0.19 +0.68%
Whole Foods Market CAPS Rating: ****