Should a person buy now that the founder is back? I say no.
- Schultz has been the Chairman all along; it is not like he left the company and was not involved in the strategic decision
- The saturated market in the USA for coffee shop chains did not change last night
- In fact, McDonalds (MCD) which has hurt Starbucks with their low cost coffee made an announcement yesterday afternoon that they are expanding their coffee initiative - in fact they are hiring their own baristas in a show of how serious they are.
- $5 coffee is a luxury not a necessity, especially when the most visited food chain in the nation is rolling out similar offering for far lower costs.
- Milk costs, and coffee bean costs are rising as with every commodity in this world as we continue into a 'World of Shortages'
- One need only look almost a year ago to this date at Dell Computer (DELL) - CEO Michael Dell returned like a white knight... overnight the stock jumped from $25 to $28, and then it promptly fell to $22 within a few months... a year later? $21.26.
No positions
3 comments:
Hi Mark,
I've posted about SBUX several times at various message boards. My intution, for what its worth, tells me that unless their is some drastic change within SBUX, the company will continue to suffer. If you look at the SBUX experience from 10 years ago, vs. today it has changed quite a bit. When I use to go into a SBUX it was a feeling of a uniqueness and "wow! how cool is this". Now when I go, I feel like the place is not taken care of, the employees are of lower quality and no sense of pride in what they are doing. I really find nothing special about SBUX anymore, so why the hell should I pay $1.75 for a small coffee? IMHO, I think MCDonalds will absorb SBUX within the next 2 years. From a book perspective it certainly is trading at a lower multiple than the rest of the industry, so maybe it is time to pick some up....even though I think they suck :)
It's sort of (on a much larger scale) a repeat of Panera Bread. Although Panera Bread did not have McDonald's gunning for them. I would not mess with McDonald's - the past half decade they have hit doubles, triples, and home runs all over the place. I don't drink coffee myself, and economically I would puke to pay $5 for a "drink" but I guess it's the cool thing to do. :) I do visit MCD all the time; I just cannot imagine a barista in there - going to change the complexion quite a bit. But the bigger picture is not to chase old growth stories (until they hit extremely low valuations) - I might be doing the same in CROX myself but last I checked growth was still there but maybe the stock is telling me otherwise - still to be determined. SBUX has been too slow of a grower for growth investors and too high of a valuation for value investors in past year. I think eventually it will keep falling and be the domain of value investors. Unless coffee replaces tea in China of course ;)
Me thinks SBUX is all about Real Estate...just like MCD is, and that is the only reason it is a very attractive value play. $5 coffee is done....IMHO...you'll a direct correlation between Coffee price and unemployment. Coffee prices come down when unemployment goes up.
Post a Comment