timwest

STARBUCKS SBUX HAS A PREMIUM VALUATION BECAUSE...

Short
NASDAQ:SBUX   Starbucks Corporation
6
My question is for SBUX shareholders. How can you hold onto shares of a stock that trade at a valuation of more than 3 times the underlying revenues of the firm and isn't taking home any money at the end of the year? The free-cash-flow isn't there for SBUX, but the market valuation is a frothy 52.72 Billion. If you owned this whole company to yourself then you would be looking at why you weren't making a profit at the end of the year. This first quarter shows an awful shift in the price of coffee but in previous quarters the price of coffee had been falling precipitously. So, SBUX ought to have raked in a few bucks along the way. I don't see massive profits on this chart. I see a crowd buying up the price of something they see everyday at the grocery store and who line up in their cars to buy premium coffee at premium prices. What is the fair price of SBUX shares? In my mind, it is less than the current price. It has been some ride up in this stock and shareholders are worth $52.72 billion right now collectively. That's a handsome price to pay for a business that rakes in so little in the way of profit. I'd suggest re-thinking the concept of holding onto SBUX shares and search for greener pastures elsewhere.

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