Over the last month, Starbucks Corporation (NASDAQ:SBUX) has not been a fun stock to own. SBUX stock is down 2.3%, to $53 per share, near its low for the year.
The quarterly results seem to be all over the map. It had $5.37 billion in sales for the Christmas quarter, $4.99 billion for the March quarter, $5.24 billion for the June quarter.
It’s enough to make some insiders pessimistic. In fact, one insider has been selling stock repeatedly this year. Insider selling can indicate problems ahead.
So is it time for investors to press the panic button on Starbucks stock, or is this a good time to buy, buy buy?
Buy, Buy, Buy SBUX
It’s a great time to buy.
Let’s start with the insider. That would be Mike Ullman, the former CEO of J C Penney Company Inc (NYSE:JCP), who is 69 and looking toward his retirement. Ullman rescued his company from the disaster that was Ron Johnson and found a solid replacement in Marvin Ellison … he really does deserve his rest and his honors.
Second, let’s look at those quarterly results. It’s a normal seasonal pattern. So far in fiscal 2016, which ends this month, SBUX has recorded sales of $15.5 billion, against $19.1 billion a year ago. Add $5 billion to the $15.5 billion and you get $20.5 billion. In fact, analysts are expecting $5.72 billion in revenue when the company next reports earnings on Nov. 3. That would take revenue to $21.2 billion, a solid 10% gain.
Finally, check out Starbucks stock’s performance. It’s not out of line with its company’s peers. Dunkin Brands Group Inc (NASDAQ:DNKN), Panera Bread Co (NASDAQ:PNRA), even Restaurant Brands International Inc (NYSE:QSR), the parent of Tim Hortons, are not soaring this month, and most of these competitors are down.
It’s just not a good time for coffee stocks right now. Traders are looking toward issues that are more speculative.
Big Plans for Starbucks
This doesn’t mean Starbucks doesn’t have challenges. It does.
SBUX stores don’t have kitchens, or trained kitchen staff, so any type of food is going to be a problem. Coffee is a daytime thing, so expanding the day’s sales into the evening is a priority. Starbucks is increasingly an international company, and tastes differ around the world, so it needs to adapt.
Starbucks management is aware of all this, and is addressing the challenges. SBUX is bringing in weekend brunch to some locations. They’re selling beer, wine and snacks at other locations. Tea has become a priority, especially in Asia, since the acquisition of Teavana in 2013. The company is creating a chain of high-end roasteries and showcasing the results in a small number of urban stores. It is pushing small kiosks into more retail shops — my local mall has three Starbucks locations inside other stores, but no free-standing Starbucks at all.
SBUX, in short, is doing anything but standing still. Some of its efforts may come up short, but it’s doing enough to address perceived problems that investors should not be concerned.
Starbucks Stock Is Still a Good Investment
SBUX may not look very good from a technical perspective. Since last October, when it reached its all-time high of $62.57, it has exhibited a pattern of lower lows and lower highs. You may have to wait a bit for a return.
But history shows that return will come for Starbucks stock. Investors who have held SBUX stock since the start of the February 26, 2008, the notorious day when it closed all its stores for training and motivation, have seen a gain of 451%, not including dividends that started at 5 cents per share in 2010 and are now at 20 cents.
You may not see those gains again, but you’re going to see something good. When traders see grounds to sell Starbucks stock, the tea leaves say it’s time for investors to buy.
Dana Blankenhorn is a financial journalist who dabbles in fiction, his latest being The Reluctant Detective Travels in Time. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in SBUX.
