Starbucks Q3 - Soaring Higher

Seattle-based coffee giant Starbucks is another core recommended stock in Vestact New York portfolios. On Thursday night last week they published their second quarter numbers. They were very good, lifting the outlook for annual revenues and profits. Starbucks stock rose 9% on Friday, coming to within a whisker of $100 a share. Wow!

Like-for-like sales (that excludes new stores) in the 13 weeks to the end of June rose 6% from a year ago, the highest quarterly figure since 2016. Growth was 5% in China. This stock has literally doubled in the last 13 months. Before that, it was flat for three years. What's the moral of the story? Buy quality companies and wait.

If you want to see how holding a stock for a long time looks, visit our Vestact website and look at the long string of reports that we wrote about Starbucks during those quiet years. Every single report ends with words like, "buy this quality company and hold".

But how could that sudden share price shift higher have happened? It's the same product, sold from the same stores? Growth expectations have changed, that's how. On Thursday the company said it now expected to deliver earnings per share for the full year of between $2.86 and $2.88, up from a previous range of between $2.40 and $2.44.

CEO Kevin Johnson has cut costs and accelerated the expansion into China, trying to capitalise on the country's growing taste for coffee and expanding middle class. He has also reinvigorated its US business with better menu offerings, more fancy cold drinks, better digital loyalty and payment systems and a coffee delivery partnership with Uber Eats. The partnership with Nestle to sell beans and other coffee consumables outside of stores is also going very well.

Our advice remains the same. New investors can continue to accumulate this stock, at current prices. I'm off to have another cup of coffee.