Starbucks Verisimo and EurAsia Takeover Set To Favor Bullish Activity

Starbucks Corporation (NASDAQ: SBUX) purchases and roasts whole bean coffees. Starbucks also sells various fresh food items such as pastries, breakfast, lunch sandwiches, oatmeal, salads, juices, tea, and bottled water.

Starbucks licenses its trademarks through channels, such as licensed stores, grocery and national foodservice accounts. Starbucks has three reportable operating segments: United States (US), International, and Global Consumer Products Group (CPG). Its Seattle’s Best Coffee operating segment is reported in Other with its Digital Ventures business. As of October 2, 2011, the company operated 9,031 stores and 4,776 licensed stores. In October 2010, the company acquired Magic Johnson Enterprise’s remaining 50% interest in Urban Coffee Opportunities. In November 2011, the company acquired Evolution Fresh, Inc.

PROFITABILITY

During the last 12 months, Starbucks reported an income of $1.38 billion. Sales for the quarter grew by 12.67 percent year over year which is a good and stable figure for the world’s leading coffee company. The company bears an annual dividend of $0.68. The company pays out 37.10 percent of its earnings as dividends over the last 12 months.

Compared to its competitors, Starbucks has slightly lower dividends. However, the company is seeing remarkable increase in revenues. We expect an increase in dividends in the future relative to the company’s consistent growth.

WORKING CAPITAL

Starbucks has a current ratio of 2.26 and a quick ratio of 1.65. The company has enough working capital to cover operations. The price to free cash flow is 84.57 times. There is a 24.32 percent increase in cash flows from the past quarter to the present quarter.

VALUATION

The company is trading at a forward P/E of 23.92 times. P/E growth is 1.54. The stock price fell during August but now, we expect the stock to be bullish throughout the last quarter.

The company is trading -17.64 percent its 52W high but, 46.47 percent its 52W low. The stock is fairly volatile with its weekly, monthly volatility of 2.14% and 1.86%. Analysts agree that the stock target price is $59.

RECENT NEWS

Green Mountain Coffee Roasters (Nasdaq: GMCR) is now offering mail-in rebates to buyers of its single-serve brewers. Between now and Oct. 28, buyers of Keurig brewers can get at least $20 back on their purchases. The rebates stretch all the way up to $50 for Green Mountain’s higher-end Keurig VUE java makers.

It was a foregone conclusion that it was going to get cheaper to go Keurig this month. The patents protecting the actual K-Cup refills expired earlier this month, and store shelves will be overrun with cheap third-party Keurig refills. Between now and Sunday, Starbucks will be selling two of its 12-count K-Cup boxes for the price of one. – 09/27/2012

MUMBAI (Reuters) – Starbucks Corp (SBUX) will open its first coffee shop in India by the end of October, John Culver, President, China and Asia Pacific, said on Friday, in the latest delay to a much-hampered entry into the country.

Starbucks had initially planned to have its first cafes in India open by mid-2011 but was delayed by difficulties in acquiring real estate and high land costs. It said in January it would have stores open by August or September.

College students would seem to be the perfect customers for coffee and donuts, so it should come as no surprise that donut shop leader Dunkin’ Brands (NASDAQ:DNKN) is planning to open locations at more colleges. The company already has 55 college-based locations, including shops at well-known universities like Emory University, Boston University and New York University. It plans to add locations at five new schools, including Virginia Tech and the University of Baltimore, by the end of October. In May, the company announced plans to open 450 new locations outside the U.S., joining other American fast-food companies like Starbucks (NASDAQ:SBUX) and McDonald’s (NYSE:MCD) in seeking growth overseas. – Investorplace 09/14/2012 (SBUX -2.44%)

Coffee retailer Starbucks Corporation on Thursday caught some continued bullish support from analysts at Oppenheimer. The firm reiterated its “Outperform” rating on SBUX as well as its $62 price target, which suggests a 24% up.

RECOMMENDATION

Increased spending on small discretionary items had a positive effect on Starbucks sales. There is also an increased consumer consumption of specialty coffee. Recently, Starbucks announced entry into the at-home premium single-cup segment, dubbed Verismo, which is estimated to be an $8 billion market. Being on the frontline of specialty coffee, we see this as a larged revenue opportunity for the company. Additionally, we see significant growth opportunities in international markets, particularly in India and China.

Starbucks dipped in valuation due to the tough economic and industrial environment. However, the company did not cease to perform in terms of profits and equity. Despite Starbucks’ high coffee prices, customers are simply willing to spend to grab a piece of this specialty coffee. With its rapid expansion through Europe and Asia, and its competitive new product lines, we expect Starbucks to have consistent increase in revenue, solid growth, and increased dividends. Our position on Starbucks is a BUY.