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How High Will Starbucks Stock Keep Climbing?


Dec. 7 2015, Updated 1:14 p.m. ET

Starbucks remains firm

Starbucks (SBUX) reached a 52-week high on October 20, 2015, and it remains firm at $61.70 a month after reaching that peak. The company was recently connected with concerns over an E. Coli outbreak that affected some retailers, including Chipotle Mexican Grill (CMG) and, most recently, Costco (COST). Year-to-date, Starbucks has returned an impressive 50.5%, which makes Dunkin’s (DNKN) -3.2% appear troublesome.

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Share price appreciation

Much of the price appreciation in Starbucks’ stock came after the company’s earnings announcement. Take, for example, the recent 4Q15 earnings. The company announced EPS of $0.43, and the stock jumped to a 52-week high of $64 after the earnings announcement. Starbucks has been riding high this year. Some investors now question how high can Starbucks keep going.

Yum! Brands (YUM) returned 4% and McDonald’s (MCD) returned 23% year-to-date. Both these companies form about 5.5% of XLY’s total portfolio. Currently, Starbucks forms about 2.3% of the iShares Global Consumer Discretionary (RXI).

Series overview

In this series, we’ll discuss some of the most recent updates at Starbucks since the company announced its 4Q15 earnings. More importantly, we’ll look at the impact of the E.Coli outbreak on the company and whether the company has large exposure to this issue. We’ll discuss analysts’ recommendations and price targets and the valuation multiples for the company and its peers.


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