Starbucks: Still a Winner

06/13/2018 5:00 am EST

Focus: CONSUMER

Jim Powell

Principal Analyst, Global Changes & Opportunities

I recommend Starbucks (SBUX) to investors who wish to take advantage of a rare opportunity to acquire a proven long-term blue chip winner at a discount, explains Jim Powell, editor of Global Changes & Opportunities Report.

Starbucks needs little introduction. The company pioneered the coffee shop as a modern gathering place in Seattle when it opened its first operation in 1971 – and now has nearly 30,000 locations worldwide.

For reasons that are not well understood by the company, or even by human behavior experts, Starbucks quickly became a roaring success even though its shops appear to be similar to those of its competitors.

The closest explanation that I ever heard about the company’s popularity is, “it has the right vibes.” Starbucks may have started with good vibes but an aggressive expansion plan is responsible for most of the company’s growth.

In addition to its coffee shops, the company offers products under the Starbucks, Teavana, Tazo, Seattle’s Best Coffee, Frappuccino, and several other brand names. The company also markets a full line of profitable snacks including pastries, breakfast sandwiches, and lunch items.

Starbucks also sells its most popular products through grocery stores and other food outlets. A recent deal with Switzerland’s Nestle S.A. (NSRGY) — the world’s leading food and beverage retailer — promises to be enormously profitable for Starbucks.

In the wake of Starbuck’s embarrassing incident with two African American men who were arrested in a Philadelphia store for trespassing, the stock is selling at an unusually attractive price. The company isn’t a fallen angel or a screaming bargain. However, Starbucks should be an excellent long-term performer.

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