After a little up-tick yesterday when Starbucks (SBUX) said it would add 10,000 stores over the next four years, and double revenue in five, the stock is moving back down again. At $32, it is down 10% in the last 90 days.
The problems seems to be that very few investors think that the next year will be great for Starbucks, let alone the next five years. Of the 21 analysts who cover the stock, five have it as a hold, according to Thomson First Call. Morningstar’s "fair value" estimate for the stock is only $35, which is below where it traded in January.
Stabucks did increase it sales by 91% from 2003 to 2006, moving from $2.39 billion to $4.61 billion. But, now its aims to double off a much larger base.
Then, there is the problems of McDonald’s (MCD) which is clearly targeting Starbucks with a better morning menu, premium coffees and 24-hour stores. Even Dunkin Donuts offers up-scale coffee.
The next four years are four hard years, at least compared to the last four. Come to think of it, that comment is obvious.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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