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Cramer: Starbucks Is Back

“The Starbucks turnaround is finally here,” Cramer said during Friday’s Mad Money.

This once-loved growth stock has been in decline for a few years, but now there’s a new kind of investor taking interest in SBUX : those looking for value.

After expanding to the point where it seemed the number of Starbucks locations rivaled that of McDonald’s, the Seattle-based temple to high-end caffeine, well, crashed. But Howard Schultz’s return as CEO has proved to be just what the company needed. He’s pushing through both cost cuts and new initiatives to improve the business and make the stock attractive again.

Those cost cuts were the main reason that Starbucks beat earnings estimates for its most recent quarter. So much so that it almost didn’t matter that same-store sales were down 6% in the US and 2% overseas. The company has done such a good job of finding ways to save that it expects to generate $700 million in 2010 that wasn’t there before.

As for new initiatives, Starbucks is implementing a new store design to make customers feel, in their words, “more at home.” The goal is to make each locations look and feel more like its surrounding neighborhood. This focus on people was lost in the relentless quest for growth, but Schultz is making it a priority again.

Also, as a way to get back to basics, Schultz plans to close 800 unprofitable US stores and 100 internationally. That won’t hurt the store-count growth, though, Cramer said, because there’s still plenty of available market share outside the States.

Starbucks is also launching new products to generate the kind of earnings growth that Wall Street likes. Just last month, the company started its new healthy food program, which includes items like the Vivanno smoothie, and it’s offering cheaper coffee. There’s even a push into instant brew, with VIA, hitting stores this fall. If Starbucks can reinvent instant coffee the way it did the coffee shop, Cramer said, “that’s gigantic.”

Trading at just 19.5 times 2010 earnings, with an expected growth rate of as much as 18%, Starbucks is cheap. And given what looks like a legitimate turn in the business, Cramer urged viewers to take advantage.

“Starbucks once again, I am proud to say, is a buy, buy, buy,” he said.

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