Shares of Starbucks Corporation (NASDAQ:SBUX) are in blue-sky territory following Thursday’s earnings update after the close. The surface numbers weren’t impressive, but Wall Street is excited and energized on the run to fresh all-time highs.
Starbucks matched on expectations for a profit of 80 cents per share, and revenue numbers were right on at $4.8 billion. Surprisingly, Starbucks lowered its expectations for second-quarter profits to 64 – 65 cents per share. The suit-and-ties had penciled in earnings of 68 cents per share. However, Starbucks’ full-year target was $3.09 – $3.13 a share, which matched the higher end of expectations.
In Wall Street gibberish, Starbucks may have been “sandbagging” its numbers, as traders were hoping to pick shares up on the cheap.
The comment made in the conference call that margins were good internationally may have saved shares from sinking below $80. The company’s CEO, Howard Schultz, talked about good growth and its China story going forward. Howard Schultz is an incredibly passionate person, and I’m sure he’s a swell guy to work for.
Starbucks has its fingers in a new pie that could bring an entirely new experience to its loyal following. SBUX’s new tasty treat is the Starbucks Reserve Roastery and Tasting Room, and customers were wowed by the experience at its first location in Seattle. I would expect that Starbucks is looking at additional attractive cities to roll out the latest red carpet offerings and the Starbucks experience.
At last count, there were over 21,000 Starbucks locations in over 60 countries. That’s impressive, but it gets better. Schultz plans to grow tremendously in China over the next few years and expects revenues north of $3 billion from that part of the globe in four years.
You want to talk tea? Starbucks is phasing out the Tazo tea brands in its stores and will be featuring products from Teavana — a company Starbucks bought out a few years ago. Tea is one of the most consumed beverages on the planet, and SBUX plans to double its tea business over the next five years.
Starbucks also bought a bakery a few years ago, and its breakfast and lunch sandwiches are dynamite. I haven’t even mentioned the experiment with alcohol and the attraction of making Starbucks a late-night gathering spot as well.
The coolest thing I liked about Starbucks over the holidays is that twice when I pulled up to the drive-through window, a customer had already paid for my coffee. I, in turn, paid for the party of four in the car behind me as I slipped the employee $20 and a $5 tip.
It may be the pay-it-forward phenomenon or lower gas prices, but, either way, Starbucks customers were in good moods. The second time, I was spared a $10 bill and another $5 tip.
The good vibes have carried over into Friday’s session, as shares are at fresh 52-week and all-time highs. SBUX stock has traded to a high of $88.49 today. Subsequently, the SBUX February 85 calls that I recommended when they were at 75 cents per share are up an astounding 400% at current levels.
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