I was long in Starbucks to varying degrees from mid 1992 (8 9/16 adjusted price) until about a month ago. During that time I saw it crack a P/E of 100 in 1992 I think (or early 1993), but did not see it get above about P/E=75 on any of its subsequent peaks until last week with the humongous run-up. Even back then a P/E of above 80 was pricey, and now the company is about 2.5 times as large with a growthrate that is perhaps 1/2 to 3/5th as high at best. I'd expect about 40-45% in the next 12 months. With a PE of 87 at a price of 40 for the trailing 12 months (.46 operating profit/share), it seems just a TAD high!
I think the big reason for the run-up last week was a combination of factors: the stock's been on a run-up, so lots of funny-money has appeared, as always happens at a top; the US Office deal; a barrage of press releases from SBUX culminating in the announcement of the round number crossing (i.e. 1000 stores); and coverage initiated by a big brokerage firm (Merrill Lynch, I think it was). I only saw the latter item mentioned in passing, and I suspect that many of that firm's clients now own SBUX.
Since I've tracked the stock, there's usually been one very high point reached each year when something has happened to stir up interest among casual investors, such as when the Manhattan store opened to great fanfare. Each time I've seen one of these mi-te-fine peaks occur, I've noticed volumes begin to thin out, with the stock support giving out about 3 weeks after the peak. Generally, this peak has not been reached again for up to 12 months, with 6-8 months typical. In some cases, the retreat has been considerable, like last year.
Ah, but when was/is the peak, you ask? Good question!
-Ben |
