My dueling partner Alyce Lomax is correct, in one sense: Starbucks
I'll grant that people may be willing to pay a premium for the overall Starbucks experience. History suggests, however, that people aren't willing to get gouged repeatedly for the same experience. Otherwise, why would theme park operators like Six Flags
Then there's China. China's population and current economic growth sing a siren song that has enticed many multinational companies to invest. Yet as legions of global titans that came before have discovered, the "affordable luxury" market is a tough nut to profitably crack in an economy with such a low per capita GDP.
Starbucks certainly has a successful past, and if it executes well, its operational future may be bright. Its stock, however, trades as if its continued rapid growth is guaranteed. That's always a dangerous situation for investors, no matter how strong the underlying company may be. Between newly hungry competition, increasing economic sensitivity, and the difficulty of profitable growth in the emerging markets, Starbucks' challenges are only increasing. I may purchase the occasional Starbucks coffee with my discretionary dollars, but my investing dollars are far more excited by the value experience.
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