is Starbucks common stock a good investment at today's price ??

Question

Explain why ??

Answer 1

That depends. Currently, Starbucks is trading at a P/E of about 50. Historically, stocks averaged much lower than that, around 15-25. But Starbucks grew 20% last year, much higher than normal. I haven't done this, but you'd have to examine the long-term potential of Starbucks - how much more can they grow in the future, both in America and overseas? If they can grow enough that their P/E eventually drops to 15-25 (probably closer to 25, since coffee is a great long-term business to be in), then it might be a good long-term investment (by long term, I mean at least 5-10 years).

On the other hand, if you're thinking of holding it for a shorter period, say only 3 years, it's possible the stock price could drop up to 50%. The stock market has been going up for 3 years now, and historically speaking, bull markets only last about that long. If the markets were to start dropping, a high P/E stock like Starbucks would drop down to a P/E ratio of 15-30 (no one can predict exactly).

On the other hand (yes, I have three hands), if you were planning on holding it for only a few months, you'd have to pay attention to everyday price and volume (for example, in the last year the price has fluctuated between 30 and 40, and it could go either way in the next few months depending on what the broader stock market does).

A value investor should as Warren Buffett would tell you not to buy it, because even though it's a great, simple business of the kind he likes, it's already too expensive in terms of P/E. If you wanted to be a value investor, you'd wait until the P/E dropped below 15.

Growth investors might buy it because it is still growing strongly, and they don't care so much about P/E.

A momentum investor would not buy it because it's only moved about 30-40% in the past year, while momentum investors look for much faster gains.

So, you see, it depends on how long you're going to hold it, and what style of investing you use (which is also determined by how long you tend to hold stocks).

One thing I can say is: never put your entire portfolio into one stock, no matter how good it seems. The minute you do that, I guarantee you a meteor will come crashing out of the sky, blowing up the plane with all of the company's senior executives just before it smashes into the company headquarters and main manufacturing plant, killing everyone and destroying most of the company assets.

That's just the way the stock market works.

Answer 2

The keyword here is in your question... "investment." Yes it is a good long term investment. I just picked up a few shares yesterday myself. With the introduction of SBUX to China, and Europe, the growth potential is a positive sign. The stock is on a slight pullback at this time so now is the time to get a few shares. It may drop down 1 point to $35.00 but will for sure head back to $40.00 SBUX stock typically has a high during the months of Nov - Jan. And besides, when was the last time you didn't have to wait in a long line to order that "white chocolate mocha." This spells revenue to me.

Answer 3

I think that SBUX is a decent investing. As I understand, their next big push will be into latin america and China. I think they have limited growth potential in Europe, except UK. That is because this type of brand has limited appeal and the general higher tastes that European have regarding coffee.

But also, since it has a high PE like the previous poster mentioned, I recommend a covered call strategy. For, one, I think it is a relatively safe stock, but I don't think it will go running to the moon. What is a covered call strategy.? I cover it on my blog here:

http://gmoolah.blogspot.com/2006/11/creating-investment-cashflow-part-i.html

Covered call is a low risk option strategy where you sell the right for someone to buy your stock (must be 100 shares per option sold. You can set the price at a place that is higher than your purchase price. In return, you keep their money, called the option premium. Read for details. I am using this strategy on SBUX now.

Answer 4

actual seem into Ethenal shares in case you're taking any ethenal enterprise seem on the fee it became into at 2 years in the past and on the instant, you will discover there is super advance there and US hasn't even all started mass-production, so your in in the previous all of us else jumps on the ban wagon.

Answer 5

yes because there on the rise and make good corropte moves

Answer 6

It's P/E ratio indicates to me that it is overpriced.