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Starbucks (SBUX): 2019 Top Picks' Mid-Year Update

07/11/2019 5:00 am EST


Mike Larson

Editor, Weiss' Safe Money Report and Under-the-Radar Stocks

Mike Larson chose Starbucks (SBUX) as his favorite investment idea for 2019. The stock has since risen 30%. Here's the latest update from the editor of Safe Money Report.

At the beginning of 2019, I tagged Starbucks as a star performer. And boy has the coffee chain ever delivered! Its shares were recently up a hefty 31% at the halfway point.

With the stock this piping hot, picking up shares on a short-term pullback is your best play. But there’s reason to believe more upside remains over the longer term.

For one thing, the stock spent a long time going nowhere. It traded sideways from mid-2015 through mid-2018 while the company worked through several strategic and operational issues. It was only late last year that it finally broke out to the upside, meaning it can still turn plenty of past skeptics into present and future investors.

For another thing, Starbucks is proving it can generate stronger American and foreign sales by attracting legions of higher-frequency, higher-spending customers to its loyalty program.

It’s also rolling out new products, including Draft Nitro Cold Brew coffee and several iced beverages designed to lure customers in during the slower afternoon hours.

In the fiscal second quarter, core earnings per share rose to 60 cents — topping estimates of 56 cents. Same store sales climbed 3%, while loyalty program membership grew 13% year-over-year to 16.8 million.

Starbucks also raised its full-year profit target. Plus, the company indicated it would maintain a fairly aggressive pace of store openings. It plans to add 2,100 new stores in the coming quarters to the 30,184 it had as of Q2.

Throw in a decent dividend yield of 1.7% and its solid Weiss Rating of “B-” (BUY), and I think you still have a winning investment here — for the rest of 2019 and beyond.

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