Growth in financial markets has become very expensive to obtain. U.S. coffee mega-giant Starbucks Corporation (NASDAQ:SBUX) has seen its valuation increase as lower for longer interest rates have reduced the yields on most fixed income assets, driving up the price of growth or risk assets. That said, I do still think Starbucks stock represents excellent value today for the "growth at a reasonable price" investor.
The main thesis supporting such a view is an expectation that Starbucks will be able to beat on its growth estimates moving forward on a consistent basis. Given that we’re in the middle of a pandemic and the next few quarterly reports are likely to be less than stellar, investors have largely shifted focus away from the near-term toward what may be on the horizon later next year or in 2022. This is where I think Starbucks could shine relative to other growth options in the retail space.
I anticipate higher-than-expected U.S. same store sales growth to dominate the headlines for Starbucks investors next year. This is due to a couple key drivers I see taking growth significantly higher than what is being priced in by the company’s current valuation multiple.
Starbucks is growing its digital footprint, and I expect the company’s best-in-class rewards program and high level of app usage among patrons to drive a significant portion of this growth. Another driver I’d suggest investors keep their eye on is the expansion of curbside pickup to approximately 2,000 stores in the United States by the end of next year, meaning most locations without easy access to drive through will be able to continue delivering to patrons through this pandemic.
Invest wisely, my friends.
