Starbucks Shares Back to 2004 Prices

Starbucks shareholders are feeling the pain in the last year. After riding the stock higher since 2001, the stock finished 2007 down 42.17%. The new year hasn’t started any better. The stock is down nearly 10% in two sessions and has hit a low last seen in 2004.

Is it a “buy” at these levels? Many on the chatrooms, such as this poster, seem to think so and are looking at the global growth story:

But let’s just assume, for argument’s sake, that the company will suffer from far slower growth in the US, not to mention all the other crap about milk prices, and competition from places where I personally would NEVER go to get a coffee (I might get my glazed donut from dunkin donuts etc, but the coffee? No way.) OK, so assuming you’re all right about the US plummeting…how about China, and Europe and everywhere else ??

Growth prospects are unbelievable when you consider that Starbucks only accounts for 1% of coffee consumption in the rest of the world (source:Morningstar). And, again from Morningstar, they only have 7% of the domestic market, so SBUX certainly has room for more gorwth in the US. But, we’re talking about the global side of the equation, so lets leave the US out of it.

Others aren’t so sure we’ve hit the bottom. Many posters still think the stock is overvalued based on current growth projections:

Brand loyalty can’t compensate for poor management, a strapped consumer, and emminent recession taking the consumer out of the mix, imo.

I’ve been riding this stock down from upper 30’s and haven’t covered yet. When the stock price gets to single digits, I’ll cover.

Starbucks is now trading with a current P/E around 21 and a forward P/E of only 15. In the last 10 years, Starbucks has never traded with a P/E under 30. Granted, their growth has slowed in recent years. But they are still projecting around a 20% year over year growth rate.

Starbucks stock is simply out of favor and investors are fleeing in droves for no reason. Paging Warren Buffett and Berkshire Hathaway: Value, value, value!