Howard Schultz's memo to his associates shows his true mettle as CEO of a company that has seen its share price increase by 4400% since it went public in 1992.
Recently, after hitting an all time high of $40 back in November, Starbucks (SBUX) has seen its share price drop over 25%. Despite growing earnings at just under 20%, and with aggressive plans to expand in Asia, the stock is trading at 27 times 2007 earnings - a multiple not seen in over 4 years.
While it is true that the giant coffee company might need to slow its plans for growth overseas and is seeing slower growth in the US, it is not uncommon for companies to run into a period of slowing growth. Indeed Pepsi (PEP) took a tumble from $53 to $41 in early 2002. Considering it was a $80 billion company when the stock took a hit, Starbuck's correction does not seem that serious in comparison.
Starbucks (SBUX) - Here is some information about Starbucks that you might not know.
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Annualized growth of 25% since 1993.
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Currently 11,000 stores. Long-term growth planned is 30,000 stores.
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There are 5 new stores opening every day.
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They currently serve 40 million customers a week.
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Offers health insurance to all employees including part-time
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It is less than one-third the size of Pepsi and Coke.
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Currently $6.3 billion in annual sales
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Higher sales per square foot than McDonalds.
The above facts, coupled with Howard Schultz's management and intent to shake things up at Starbucks lead me to believe that this stock is about to find a bottom. Be ready to buy at $28 and more if it dips down to $27.
-- Faisal Laljee
Full Disclosure: I don't own SBUX but my position might change anytime without notice.