Starbuck's Gets Off Track (SBUX)

Starbuck’s stock is trading at about $36, which is almost exactly where it was six months ago. The stock traded under $10 five years ago, so it really acted like a growth stock until recently.

The primary reason that the share price of a growth stock does not grow is that the market is concerned about the growth.

UBS just upgraded SBUX with a price target of $42. It said the company’s shares were undervalued. The company says it is gaining ground in China. And, even with revenue up 20% in the last quarter to $2 billion, and positive remarks from analysts, Wall St. is worried about the future.

The company has said that most of its growth is ahead of it. Starbucks has about 12,000 stores worldwide and believes that it will eventually have 40,000. But the company also said that margins are flattening, and investors just can’t seem to accept that.

Thre is actually no reason to think Starbucks will head up anytime soon unless it can show that its guidance was too conservative.

Douglas A. McIntyre can be reached at [email protected]. He does own securities in companies that he writes about.

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