Long considered to be one of the finest growth companies in the stock market, Starbucks Corporation (NYSE:SBUX) has continued to climb higher and higher year after year, consistently providing investors with a unique growth profile in the retail arena which has remained largely unparalleled for some time now.
After announcing the closure of its Teavana stores and its online store, shares of the Seattle-based coffee retailer dipped more than 20%, resulting in a steep correction for investors who bought at the top, and what I am going to argue is a buying opportunity for value investors to pick up shares near the company’s 52-week low amid concerns which have largely been overplayed by the media.
Starbucks remains one of the best growth companies in the retail space, seeking emerging markets as the next wave of growth for the iconic brand – with massive untapped markets awaiting the Starbucks brand, it is difficult for most "slow growth" theses to take hold, in my opinion, even in the face of the recent Teavana store closures, closures which were inevitable, in my opinion.
With a valuation multiple now more in line with its competitors and a dividend which has breached 1.8% (not great, but not bad either), Starbucks has entered a new realm of quasi-value from a "growth gem" valuation multiple it has held for many years.
I expect to see continued earnings growth combined with slight valuation deterioration in the years to come as Starbucks matures, however I expect earnings to outgrow any valuation contraction, leading to continued long-term returns for value investors today.
Invest Wisely, my friends.
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