The recent dip in the share price of Starbucks Corporation (NASDAQ:SBUX) has intrigued many investors who see a potential value opportunity here to pick up shares of a growth gem at a relative discount to historical prices.
While the coffee company has traded at a relatively rich valuation for some time, and the recent selloff brings the company's valuation in line with many of its peers, the potential growth Starbucks provides investors with over the long-term continues to be one of the main drivers of value investors to the company at current levels.
After announcing a number of sweeping changes to the company's strategy, including closing all of the company's 379 Teavana stores and more recently announcing the closure of the company's online store, it makes sense why some long-term investors have decided now may be the time to take profits off the table.
After all, Starbucks' stock has significantly outperformed the broader market since its initial public offering (IPO), and with the company's management team now indicating the company is expected to grow at 3% per year for the foreseeable future (which isn't bad, compared to most companies and industries out there), downside risks remain with respect to potential valuation multiple contraction.
I believe that Starbucks has done an excellent job of generating growth in the "easier" markets, essentially grabbing much of the low hanging fruit which was available to management in North America and Europe. Moving toward Asia and having the ability to successfully penetrate a market which has proved to be very difficult for others to crack, will be the next frontier investors will need to look to for growth.
Whether the downward growth revision by Starbucks' management team is indeed a short-term one, or more representative of long-term growth rates in the industry, remains to be seen.
At this price, however, it may pay for value investors to put some chips on the table and see what happens.
Invest wisely, my friends.
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