Starbucks Corporation seems to be doing well despite the economic slowdown and lack of job growth. Typically, a premium coffee provider like Starbucks would be showing signs that people are skipping the lattes and mochas for cheaper brands.
In addition, Starbucks purchased Evolution Fresh (quality fresh juices and smoothies) and the Bay Area’s La Boulange Bakery for a reported 100 million dollars. The implementation of these new products won’t be fully realized for several months, although Starbucks is already opening new Evolution Fresh juice stores and making the juices available at supermarkets. We probably won’t see La Boulange Bakery products until at least next year 2013.
Another factor for investors is that Starbucks stock hasn’t raised its quarterly dividend (.17 per share) in quite a while. And the annual dividend of .68 cents per share isn’t really all that high for such a successful company.
And All-Time High of $62
Starbucks ($SBUX) stock reached a 52-week high (and all-time high) of $62 a share earlier this year. Then, in May 2012, the stock began to experience resistance around the $60 to $62 range and began to plummet. It has been struggling and moving sideways every since.
Starbucks ($SBUX) 9 Month Chart
Starbucks ($SBUX) 5 Year Chart
(via Scottrade) On 4/26/2012, SBUX reported 2 quarter 2012 earnings of $0.40 per share. This result was in-line with the consensus of the 28 analysts following the company and beat last year’s 2 quarter results by 17.65%.
The next tentative earnings announcement is expected on 07/26/2012.
SBUX’s PE ratio is among the highest of any stock in the Food Processing industry and signals that investors have high hopes for this company’s future business prospects. Additionally, during the past year, earnings growth has outpaced its historical five year growth rate.
Why I Sold Starbucks
If you’ve been following my blog, I sold my shares of $SBUX very close to Starbucks’ 52-week high, for a good profit. Once I saw that $SBUX was meeting much resistance at around the $60 level, I quickly sold all my shares.
I plan to buy more $SBUX shares at a later time when I feel the support has shown a bottoming out at around the $50 level. It may go lower because of all the news coming from Europe. We’ll see. Starbucks plans to open more stores in Europe, but with the Euro Crisis continuing on this might halt expansion plans.
We’ll see how the stock performs in the weeks to come. I do plan to eventually buy shares of Starbucks stock sometime in the future, but for now I’m staying away from this stock.
Starbucks Corporation (Starbucks) is a roaster, marketer and retailer of specialty coffee in the world, operating in more than 50 countries. Starbucks purchases and roasts whole bean coffees that it sells, along with handcrafted coffee and tea beverages and a variety of fresh food items, through Company-operated stores. The Company also sells a variety of coffee and tea products and license its trademarks through other channels, such as licensed stores, grocery and national foodservice accounts. Starbucks has three reportable operating segments: United States (US), International, and Global Consumer Products Group (CPG). Its Seattle’s Best Coffee operating segment is reported in Other with its Digital Ventures business. As of October 2, 2011, the Company operated 9,031 stores and 4,776 licensed stores. In October 2010, the Company acquired Magic Johnson Enterprise’s remaining 50% interest in Urban Coffee Opportunities. In November 2011, the Company acquired Evolution Fresh, Inc.