There have been a lot of investors perking up to Starbucks (SBUX) lately – and with good reason. The Seattle-based coffee shop has posted +12% profits since January 1 in a down year so far for the rest of Wall Street. In the long term things look even better for Starbucks stock, with shares up more than +70% over the last 12 months – trouncing the +15% gains in the major indexes!
But if you think this iconic stock is the only way to cash in on the world’s caffeine junkies, think again. Three stocks Peet’s Coffee and Tea (PEET), Caribou Coffee (CBOU) and Tim Hortons (THI) are all giving SBUX a run for its money.
For the record, I’m bullish on Starbucks myself. The company rates an A this week overall in my Portfolio Grader stock rating tool – the highest possible grade for a stock. However, these small up-and-comers have a much higher ceiling than Starbucks because they have a lot of room to grow. Let’s take a look:
Peet’s Coffee & Tea (PEET): This coffee stock is not big on the retail game. As of January 3, PEET operated under 200 retail stores in the U.S. and mostly offered its tea, coffee and brewing gear to foodservice companies and to other stores to sell. The company has seen big success due to its high quality drinks, topping Wall Street earnings estimates in three of the last four quarters by an average of about 13%. Dougherty & Company recently upgraded PEET from “neutral” to “buy” at the beginning of May. PEET stock is up 14% year-to-date and is up over 30% in the last 12 months. The average price target among Wall Street brokers is about $43 – a 13% premium on its current price of around $38.
Caribou Coffee (CBOU): More closely comparable to Starbucks, Caribou is a retail coffee shop that operates more than 500 outlets across the United States. Caribou Coffee also sells premium whole bean and ground coffee to grocery stores, mass merchandisers, and even college campuses. CBOU stock is up 17% year-to-date compared with a decline in the broader market, and is up about 31% in the past year – about double that of the S&P 500. CBOU stock has a price target of around $10 from most Wall Street brokers, an 11% premium over the current valuation of around $9 a share. Caribou has seen a handful of upwards earnings revisions in the past several weeks, and typically such a move indicates an earnings surprise is in the works for the company’s next quarterly report.
Tim Hortons (THI): While bigger than Caribou Coffee, Tim Hortons and its some 3,500 locations in Canada and the northern U.S. serve as much food as they do java – with bakerys making donuts and muffins for breakfast and lighter fare like sandwiches and wraps for lunch. But make no mistake, just like Dunkin’ Donuts is known for its coffee so do Canadians rely on the premium brew of Tim Hortons to wake up and get going. The company has seen steady earnings across the last fiscal year and is holding its own when it comes to same-store sales. Its Canada locations saw 5.2% growth in the first quarter of 2010, and U.S. locations saw same-store sales increase by 3.0%. THI stock is currently trading at around $33 a share, but with a price target on Wall Street of $39, shareholders could be looking at a nice +18% gain if that target holds up.
As of this writing, Louis Navellier did not own any of the stocks mentioned here in personal or client portfolios.