Over-caffeinated? Starbucks (SBUX) Stock Hits All-Time High

Remember a few years ago how Starbucks (Nasdaq: SBUX) stores seemed to multiply with every passing week? Well now that’s what the company’s shares are doing.

Starbucks stock has risen to an all-time high of $61.67 a share this afternoon – nearly double the price it was trading for a year ago, triple the price from late 2009 and more than seven times the $8.36 the stock was trading for in March 2009. Starbucks’ stock is up 33% year-to-date.

How has the company done it? By actually closing some of its stores – 600 of them, to be exact. That and increasing its revenue $1 billion a year since 2009.  

But has the stock ascended too high? Possibly. It’s currently trading at 37 times earnings with 24% EPS growth expected over the coming year, so it’s not exactly cheap at the moment. Those numbers could change later this month when the company reports earnings on April 26.

However, with coffee prices rising, it might be difficult for Starbucks to continue growing its profits to the degree it has been recently. The company’s average cost of goods on a percentage of total revenue basis was 42.2% in 2011, but increased a few ticks to 42.5% and 44%, respectively, in the last two quarters of the year.

Still, Starbucks’ stock has been piping hot for a good three years now. It’s arguably the most recognizable coffee brand in the world, and the company has been expanding rapidly into areas like China, and just entered the lucrative single-serve coffee market by partnering with Green Mountain Coffee Roasters (Nasdaq: GMCR) and introducing a single-serve coffee brewer of its own, called the Verismo.

So while it may seem overpriced at the moment, Starbucks has enough brewing that it’s reasonable to think the stock’s rapid ascension can continue. 

Published by Wyatt Investment Research at