Why Investors Love Starbucks: Howard Schultz
This guy has a way of soothing fears that goes a long way when investors consider a stock.
Starbucks' shares, despite a less-than-perfect earnings report on Thursday, were rising 3.1% to $75.63 at last check.
Brian Sozzi, CEO and chief equity strategist of Belus Capital Advisors said Friday's share price move is "a result of the Howard Schultz's charm."
"He does a strong job of focusing on the positive and making sure the Street buys into the positive," Sozzi wrote in an email. "The key positive today: quotes on the dollars loaded on Starbucks card and the image conveyed of it all being unleashed on Starbucks stores in second quarter, driving a monster quarter and full-year guidance raise." Sozzi rates the company at "hold."
Late Thursday, Starbucks' first-quarter earnings of 71 cents a share beat consensus by 2 cents. Revenue rose 12% to $4.24 billion, however Wall Street was expecting more, looking for $4.29 billion.
Same-store sales in the U.S. also missed consensus expectations for the December-ending quarter, coming in at 5%, versus expectations of 6.4%. It was clear that even darling Starbucks felt some of the same troubles that many retailers felt during the holiday season.
"Holiday 2013 was the first in which many traditional brick-and-mortar retailers experienced in-store foot traffic give way to online shopping in a major way," Schultz said. "As our solid traffic growth and record Q1 results demonstrate, Starbucks unique combination of physical and digital assets positions us as one of the very few consumer brands with a national and global footprint to benefit from the seismic shift underway."
Starbucks continued to play up its embracing of the digital consumer through its mobile technology and growing loyalty card base. Starbucks said dollars loaded on Starbucks Cards globally reached $1.4 billion in the quarter.
Starbucks also upped its earnings forecast for the fiscal 2014 year to a range of $2.59 to $2.67 from $2.55 to $2.65, previously.
In Sozzi's latest commentary for TheStreet, as much as the market may love Schultz, it's important to check your biases at the door when making an investment.
He points specifically to the slowing transaction growth in the company's Americas segment, that may have "surfaced because of the 'seismic' shift in how people consumed goods ... or from store operating issues born from an expanding menu (denied by the company)," is a development that "is not factored into the valuation on a publicly traded Starbucks," Sozzi wrote in an article on TheStreet on Friday.
He also was surprised that Starbucks had to resort to in-store promotions to get customers in the door last month.
Despite concerning trends, Wall Street still loves this stock.