This Company Becoming the Apple of Consumer Stocks
Trader Mike Murphy thinks one company is becoming so strong in the consumer sector, it’s kinda' like Apple. And no, it’s not McDonald’s.
Murphy’s bullish comments are about Starbucks, the java giant that fell out of favor with investors in 2008 when Starbucks announced plans to close 600 stores.
“A couple years ago, they were opening too many stores, reminds Murphy. “They got over their skis, so to speak." In other words, investors sold the stock, worried that valuations were greater than the stock warranted.
However, flash forward to 2011 and "the coffee giant looked a lot like its old self again," writes Alice Lomax of The Motley Fool.
That is, the company is growing again and has leveraged pricing power. "I see them as the Apple of the coffee world,” adds Murphy.
Starbucks customers want their products and are willing to pay up to obtain them. “If you want a Starbucks latte you're going to pay the $4 to get it,” Murphy says.
Murphy thinks the stock is a buy. So does Motley Fool. "Even while it's trading at 20 times forward earnings, I believe Starbucks is still a solid buy for long-term investors, too," writes Lomax.
"Results confirm they've gotten the growth engine revving again," says Murphy; the java giant grew its sales by 9.3% in the 12 months ended October 2011, with net income increasing by 31.7% to $1.25 billion, or $1.62 per share.
"As commodities come down, I think the stock continues to move," Murphy says.
Got something to to say? Send us an e-mail at email@example.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment, but not have it published on our Web site, send those e-mails to firstname.lastname@example.org.
Trader disclosure: On Dec 27, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Kelly is short CREDIT SUISSE (CDR); Kelly is short UBS (UBS); Kelly is short BARCLAYS (BCS); Kelly is long ISHARES RUSSELL 2000 (IWM); Kelly is long SPYDER S&P REGIONAL BANKING INDEX (KRE); Kelly is long UNITED TECHNOLOGIES (UTX); Murphy is long AK STEEL (AKS); Murphy is long BANK OF AMERICA (BAC); Murphy is long WHIRLPOOL (WHR); Murphy is long ABERCROMBIE (ANF); Najarian has long call spreads in APPLE (AAPL); Najarian has long call spreads in AK STEEL (AKS); Najarian has long call spreads in US STEEL (X); Najarian has long call spreads in PNC FINANCIAL (PNC); Najarian has long call spreads in MICROSOFT (MSFT); Najarian has long call spreads in RIMM; Najarian has long call spreads in CNI; Najarian has long call spreads in CP; Najarian has long call spreads in NSC; Najarian is long CIGX; Najarian is long CBOE; Najarian is long CME; Najarian is long SHLD stock; Najarian is short call spreads in Sears Holdings (SHLD); Scaramucci is personal long BANK OF AMERICA (BAC); Scaramucci is personal long MCDONALDS (MCD); Scaramucci is personal long YUM BRANDS (YUM); Scaramucci is personal long CITIGROUP (C); Scaramucci is personal long GOOGLE (GOOG)
For Art Hatfield
For Marty Mosby
Bank of America is or was, during the 12-month period preceding the date of the distribution of this report, a client of Guggenheim Securities, LLC. Guggenheim Securities, LLC provided Bank of America non-investment banking securities-related services. Bank of America is or was during the 12-month period preceding the date of the distribution of this report a client of Guggenheim Securities, LLC or its affiliates. Guggenheim Securities, LLC or its affiliates provided Bank of Americanon-securities related services. Guggenheim Securities, LLC or its affiliates received compensation from Bank of America in the past 12 months for products or services other than for investment banking services. Guggenheim Securities, LLC or its affiliates expect(s) to receive or intend(s) to seek compensation for investment banking services from Bank of America in the next 3 months.
CNBC.com with wires.