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Coffee Stock #5 – Starbucks (SBUX)
The big news in the coffee world recently has been brewing behemoth Starbucks (SBUX)as it has bounced back big-time. The company bested Wall Street earnings estimates in late January thanks to 4% growth in same-store sales and fiscal first-quarter profit that more than tripled over last year.
Cost-cutting efforts and the downsizing of underperforming stores has really paid off. Starbucks has now closed at 676 U.S. locations and almost 100 abroad, but has managed to see stronger sales. This may sound counter intuitive, but a rejuvenated product line with affordable options and low-fat drinks like the Skinny Latte have made consumers fall in love with SBUX once more.
For years, Starbucks was the darling of Wall Street. It seemed to do no wrong. The shares vaulted from less than 70 cents a piece in 1992 to $40 by 2006. But Starbucks wasn’t managing its growth very well, and they opened too many stores far too quickly. As a result, shareholders paid the price. But now, things have really turned around and I feel like Starbucks is back on track.
I rate SBUX an A, or strong buy.
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