Earnings season brought some big dips in well-known stocks, but are these opportunities to snatch up shares, or do the sell-offs represent true cracks in business models? Here's a look at some of the potential bargains, and potential traps.
Switching to decaf
After reporting earnings, Starbucks
In places with less knowledge of the difference between a cappuccino and a macchiato, Starbucks still has a huge opportunity. In the China and Asia-Pacific region, revenue grew 31% while operating income grew 37%, and the company opened more than 100 new stores in the quarter. This brings the total to more than 3,000 stores in the region, compared with 12,500 in the Americas region.
In the Americas, Starbucks' largest market, same-store growth slowed to 7% from 8% a year earlier, but the stores are being run even more efficiently, with operating margin increasing more than 1%. In addition, Starbucks penned a deal with Coinstar
A torn tortilla
Since its most recent earnings report, Chipotle
What does paying 35 times earnings get a new investor? Besides the proven management and business concept, the opportunity of a burrito-filled world. Chipotle has yet to expand beyond the U.S. and Canada. Currently, this protects it from slowdowns in Europe and China, but it also exemplifies how much room its burritos have to run. As Fool colleague John Maxfield points out, former Chipotle investor McDonald's earns more than half of its revenue from abroad.
Game maker Zynga
Facebook, which depends on Zynga for about 10% of its revenue, continues to grab at virtual straws to capitalize on its almost 1 billion users who use it at least once a month. Until it finds a moneymaking concept, Facebook's stock price will continue to slide as investors realize that just because everyone uses a service, that doesn't mean anything if it's a free service.
Another buying opportunity
Big moves like these sell-offs can provide great buying opportunities as other investors react to their emotions, and institutional investors don't want to be caught holding a big decline. Just be careful to make sure that only the stock price is broken, and not the business.
Unfortunately, there might not always be the perfect buying opportunity for some stocks that you should be holding. And even though you may not get the price you want, good-quality stocks can provide fantastic returns and growth wealth over the long term. For three such stocks that you should check out, read our free report: "3 Stocks That Will Help You Retire Rich."
Fool contributor Dan Newman holds no position in any of the above companies. Follow him on Twitter, @TMFHelloNewman. The Motley Fool owns shares of Chipotle Mexican Grill, Facebook, and Starbucks. Motley Fool newsletter services have recommended buying shares of Facebook, Starbucks, and Chipotle Mexican Grill and writing covered calls on Starbucks. We Fools don't 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. The Motley Fool has a disclosure policy.