But the stock is cheap. Though Starbucks trades at 31 times this year's earnings, which is above the industry average of 25.32 times, it deserves that premium. The 79 billion dollar company has unparalleled brand awareness. Please, take it from the 17 year old boy who can't go a day in school without seeing at least five girls with some iced mocha-frapa-latte, sipping out of the iconic green straw. None would be caught dead walking around with a Dunkin Donuts cup, but when it comes to Starbucks... Well, it's the Louis Vuitton of the coffee industry. It is largely for this reason that I bought the stock. I find that just opening your eyes and seeing what people use is a great way to get a feel for what is hot. Of course, do your due diligence before placing an order, but nonetheless I believe it is a good tactic.
Here is an example of how a portfolio could be built simply by waiting in line at, say, Starbucks. Well first, let's begin by not discounting the fact that you are standing in line at Starbucks-most likely not because of faulty service, but because there are just so many people who need their caffeine-fix. You know what you want to order and get bored waiting in line, so you pull out your phone. Your AAPL phone. And while you're at it, you see the person in front of you, and the person in front of him or her doing the same thing. And what app are they using? Probably Facebook (FB), Instagram (also FB) or Twitter (TWTR). Heck, maybe they're even playing Candy Crush (KING). Just opening your eyes to the world around you can prove (and has proven) to be very lucrative. So, as for Starbucks: It deserves the premium and is, by no means, expensive. I think that CEO Howard Schultz is doing miraculous things with the company, namely through partnerships with already popular companies such as Spotify. Starbucks reports earnings on July 23, and I believe an earnings miss is not in its future. Investors always seem to be worried about the price of coffee having a heavy influence on Starbucks' performance. While I disagree with this notion, the price of coffee has decreased drastically over the last six months, which surely quells much of the wrongful skepticism. Moreover, the partnerships and innovations to get lines moving quicker should begin to bear fruits and show up on both the top and bottom lines. Technically, the stock could be mid-breakout. It was recently bumping up against a resistance level at $52.50, but remained above it over the last few days. I see the stock at $58 a share by the time it reports earnings. Did you like this post? If so, make my day and leave a comment below! If you didn't, then tell me what I should do next time. Thanks! Read: Rite-Aid is the Right Way to Go Want to be a guest writer? Click here.
0 Comments
|