Dueling Fools
August 12, 1998
Starbucks Stops Here
Starbucks Price (8/11/98): $41 23/32
We have another great Duel brewing this week. Over the last few years it's been hard to decide which has been richer, the premium coffee served at Starbucks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBUX)") else Response.Write("(Nasdaq: SBUX)") end if %> or its shareholders? With more than 1800 coffee bars worldwide, the Seattle-based company has percolated success. Just last month it became the newest addition to the Fool Portfolio.
Everybody loves Starbucks, right? No, not right. This week Bill Barker (TMF Max) and Rick Munarriz (TMF Edible) are Dueling Fools. Bill is excited over the future prospects of the company while Rick prefers his optimism decaffeinated.
We promised you a double latte battle royale, and we hope that you will agree that this Duel will be good to the last drop. But who will be the one to drop? Bill? Rick? You decide because...
You Get to Vote!
Once you've read the arguments and the rebuttals, it's your time to cast your vote. We'll tabulate results each week and revisit them from time to time to see whether you were right! As always, we invite you to join us in the Dueling Fools Message board to continue the duel.
[Any suggestions, comments, praise, or flames, please send them along to the Dueling Fools Team.]
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The Bull... When the Fool Portfolio announced its intent to add Starbucks at a price of about $53 a share, a then P/E of roughly 65, perhaps the buy report should have included an echo of the litigation-inspired warning that adorns every cup of the Seattle-based retailer's coffee: "Careful, the stock we're about to enjoy is extremely hot." After that buy report was announced, a little additional froth was added on top, and the shares quickly peaked at a mere 1/16 shy of $60 per share. However, the recent 3Q earnings report, though announcing earnings per share in line with estimates, did not include an announcement of the split expected by some. Then Starbucks announced July same-store sales that were only two percent better than the year before. The stock has cooled back down, and now even my bearish opponent Edible will have to admit that at a recent price below $42 per share, this world-beating coffee retailer's stock is much more... Potable? Continue... |
The Bear... Pardon my bout with nostalgia this week. This Duel takes me back to when I was a knee high, gathered 'round the living room television set watching Battlestar Galactica with the family. It's Starbuck, in outer space. Of course, the only difference between the flying ace Starbuck then and the space shot valuation of Starbucks today is that the earlier version was science fiction. Today, even after recent weakness, shares of Starbucks are strung out in a caffeinated bliss and it's all real. With the company expecting to earn between $0.89 to $0.94 a share this year, and the stock perched at $43 recently, is a company showing slowing growth really worth almost 50 times earnings? Two weeks ago in his "Fool on the Hill" column Dale Wettlaufer broke down the numbers and predicted that it was bound to tumble. As luck would have it, I see this only as the beginning. Continue... |
Last Week's Spiders Results
| Answer | Percentage |
| I can't make up my mind | 3% |
| TMF Jeff's Bull argument |
42% |
| TMF Parlay's Bear argument |
31% |
| They were both excellent |
21% |
| They were both lame |
3% |