Broken Moats
Family-Office Long/Short Research, Variant Perception
Starbucks still carries a premium valuation even as coffee competition intensifies nationwide, so betting against it is reasonable. Coffee is habitual and generates good cash returns, but barriers to entry are low: deep-pocketed, PE-backed 7 Brew and regional chains like Summermoon and Foxtail are scaling aggressively. @CreditCapi's short case adds that store closures inflated Starbucks' same-store sales growth by 483 bps and that competitor openings cut its traffic 8-10%. x.comÂ
Starbucks looks expensive on an estimate-based earnings screen: 29x next year's projected earnings versus 18x for restaurant chains implies a $49.43-$62.91 fair range against $91.43. That forecast is 80% above trailing earnings; this is levels-only work based on reported estimates, not fundamental diligence. x.comÂ
Starbucks has been too much of a drag on performance for anyone who bought within roughly the last 13 years, which helps explain why fund managers barely own it. The lack of a traffic rebound is disappointing; the expected bounce from workers returning to offices never came. x.com x.comÂ
Starbucks is turning around, with good comparable sales and a return to growth after trading sideways for nearly six years. A weekly and monthly breakout above $105 needs to hold and start trending, with a likely multi-day move of up to about 20%. x.com x.comÂ
Starbucks looks too expensive for its growth. Even after sales of $9.532B and EPS of $0.50 beat estimates, investors are paying about 80x earnings or 42x forward earnings for only 2-5% growth. x.comÂ
Dutch Bros has gotten cheaper after a long slide, now under 30x forward EPS with 35% EPS growth and 3.1x current-year sales with revenue growth around 30%. That is roughly Starbucks' price-to-sales despite 30% versus 3% revenue growth, while Cava trades at 4x sales and 69x forward EPS with 27% revenue growth and the same 35% EPS growth. Same-store sales growth remains far ahead of nearly every other company. x.com x.com x.comÂ
Starbucks is a best-in-class operator in a higher-for-longer environment that will squeeze consumers and send them to the winners. April CPI rose 3.8%, hotter than expected, costing the Fed its best argument for a cut. CEO Brian Niccol delivered the first earnings beat in five quarters and a second straight quarter of traffic growth, the hardest thing to pull off when wallets are tight. x.com x.comÂ
A Starbucks takeover of Chipotle would be a warning sign: an underperforming company chasing far-from-obvious synergies risks distraction when it needs leadership, product innovation and better merchandising. Chipotle bowls at Starbucks or supply-chain gains look insignificant, and the deal may be CEO Brian Niccol's best chance of keeping his job after two weak years. Per the Financial Times, Starbucks has worked with advisers on a proposal, about $41 billion at Chipotle's current price. x.com … Show more
Starbucks' iced coffee is possibly the biggest scam ever, overpriced and so low in quality that the bitterness comes through cream and sugar. The stock isn't worth zero only because its customers have so much money they no longer care. x.com x.comÂ
Starbucks' turnaround is underway now that Brian Niccol has firmed the foundation and has room to grow the business. It had to shrink to grow, fixing too many stores, too many concepts, no in-store vibe and broken processes. This will not be a Chipotle-level outcome, but with Niccol at the helm it can be a consistent compounder. x.comÂ
Coffee Holding Company remains a favorite deep value idea after a strong quarter that produced $1.15 per share in free cash flow. Sales grew 20% year on year and net income rose 45% to $0.29 a share, and the Empire acquisition looks to be working out well. The company said sales are strong in private label, branded and green unroasted beans. The balance sheet stays strong with no long-term debt, and shareholder equity grew sequentially; no dividend was paid this quarter. x.comÂ
