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Starbucks Corporation Message Board

  • sbuxafraud sbuxafraud Jan 15, 2013 4:51 PM Flag

    Why Sbux will falter

    By contrast, Starbucks shares have been rising from about $45 in November to around $55 recently. That strength might be masking what is to come, and that could be weaker sales in the United States due to the payroll tax hike. Although Starbucks serves people of all income levels, a specialty drink that costs $4 or $5 might be one of the first discretionary expenses that middle class consumers reduce or eliminate. If so, Starbucks could be a likely candidate to announce weak guidance for the first quarter. Plus, the stock is not cheap. Analysts expect the company to earn about $2.16 per share for 2013. That puts the price to earnings ratio at about 25, which is considerably higher than the average of 14 times earnings for the S&P 500 Index.

    While all these companies have solid business models, the impact of the payroll tax hike does not appear to be priced in yet. As the Reuters article mentioned above states, the pain could start being felt over the next few weeks. After these stocks adjust to the new levels of pay in America, it could be a much better buying opportunity for investors to consider in the coming weeks

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