Even if we have slower or even negative growth, some companies will still prosper — and their share prices offer great opportunities; one of these is Starbucks (SBUX), suggests Mark Skousen, editor of the speciality trading service, Home Run Trader.
The company owns and licenses approximately 17,000 specialty coffee shops in North America and another 17,000 in international markets. It also sells its branded coffees online and through various grocery stores and other retail outlets.
Recent stumbles — particularly with labor issues — have caused founder Howard Schultz to retake the reins as CEO. Schultz delivered a 21,000% gain in Starbucks shares between its initial public offering (IPO) in 1992 and his departure as CEO in 2017. And he is determined to get the company back on track.
The biggest issue Starbucks faces is unionization efforts by a small group of employees that threatens to raise costs and create internal strife.
Starbucks already pays above-market wages and offers health care benefits to both full- and part-time employees, stock options, free college tuition through its College Achievement Plan, paid parental leave and a national sick pay program.
To invest more in the company’s people and stores, Schultz immediately ended the company’s share buyback program. But this was not because the stock is overvalued.
SEC filings reveal that Schultz recently purchased 210,000 shares of Starbucks at up to $72.61 a share — an investment of over $14.7 million. He now owns 19.6 million shares. Schultz knows that earnings at Starbucks are still growing. And sales are up 15% year-over-year.
Moreover, lockdowns in China — the company’s second-largest market — are finally ending. Looking ahead, I expect earnings per share to rise from nearly $3 this year to more than $4 in 2023.
That makes the stock inexpensive at its current levels. Plus, you’ll earn a 2.5% dividend yield here. So, pick up Starbucks at market, and place a sell stop at $59.
