Coffee king Starbucks
After the news comes out, we'll have time aplenty to dissect it. But in these few hours before we begin obsessing over Starbucks' short-term progress, let's take a moment to review what investors think about it as a long-term investment. Our tool in this endeavor: Motley Fool CAPS, where we poll more than 28,000 investors for their views on more than 4,000 companies, Starbucks among them. Here's what Fools have to say about the company.
Up or down?
More than 3,000 investors have submitted opinions on Starbucks. The verdict: "Something tastes funny. How old is this coffee again?"
Typical for CAPS, 86% of investors in general think Starbucks will outperform the market. But when you decant off the less successful players, leaving the views of just the CAPS All-Stars, the enthusiasm drops to a more muted 81%. Put it all together, add three spoonfuls of sugar, and stir well, and CAPS gives this one just two stars out of a possible five.
As you might expect, that puts Starbucks toward the bottom of the mug of its CAPS peers:
|
Specialty eateries group |
|
|---|---|
|
Buffalo Wild Wings |
**** |
|
Chipotle |
**** |
|
Sonic |
**** |
|
Panera Bread |
*** |
|
California
Pizza Kitchen |
*** |
|
Starbucks |
** |
|
Caribou Coffee |
* |
Wall Street vs. Main Street
Meanwhile, over on Wall Street, they think this coffee tastes just fine -- they just wish it cost a bit more, to keep out the riffraff. Out of the eight Wall Street professionals we track on CAPS, seven think Starbucks is a buy, and only one would sell it. High praise indeed for a stock that's managed to underperform the S&P 500 by a full 31 percentage points over the past 52 weeks.
Bull pitch
The top-rated bull pitch on Starbucks comes from the Fool's own co-founder, Tom Gardner. Says the bossman: "This is a powerhouse brand with high loyalty among customers. The balance sheet is solid. The high-growth rate projections are plausible because of the opportunity in China. Howard Schultz is a world-class business leader. Right now, I am cautiously optimistic about new CEO Jim Donald ..." (Caveat: This recommendation is eight months old.)
Bear pitch
Daring to question Tom's optimism -- and boasting a sky-high CAPS rating that Tom only wishes he had -- is one of our All-Star CAPS investors. For the time being, let's call him, oh, I don't know: "Doubting Thomas." Queries he: "Is it possible for their existing customers to increase their coffee consumption? Their growth must come from adding new customers. They don't just sell coffee, they sell an image or an experience, which is why they can charge so much for a cup of coffee. How many new locations can they add? Will that image fare as well when they try to export it to other countries? Who knows?"
Fine questions, DT, but what's the answer? "I do not see how they can possibly sustain the growth at sufficient levels to justify such a high P/E ratio. The moment they stub their toe, the share price will take a big tumble. Look what happened to Whole Foods."
Who said that?
You know Tom. To learn who questions his Foolishness, and see just how he earned a CAPS reputation exceeding that of our glorious leader, just click here.
Starbucks is recommended in Stock Advisor, Buffalo Wild Wings is recommended in Motley Fool Hidden Gems, and Chipotle is recommended in Rule Breakers and Hidden Gems. What type of investor are you? Take a free trial to any of our newsletters and find out.
Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's ranked 174th out of more than 28,000 raters.
