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.