Who among us doesn’t know the taste of coffee?  The wonderful aroma from the coffee bean gives us energy to get through the day.  Everyone, from a production line worker, a busy executive, a single mom, a parent or a student, many find coffee a necessity.

There are many great coffee shops, including Dunkin Donuts, Tim Hortons, or the one that is in the news recently as one of their founders considers a run for the Presidential office, Starbucks.  

Starbucks is considered a “second wave” retailer, distinguishing itself from other coffee serving venues by taste and quality, together with a unique customer experience, as they popularize a darkly roasted coffee.  Starbucks was founded in Seattle, Washington in 1971.  As of 2018, the company operates 28,218 worldwide locations.

It’s hard to deny that in the coffee industry, Starbucks (NASDAQ:SBUX) can be relied upon to be ahead of trends.  Another trend is that Starbucks stock isn’t leading the way.  In simple terms, according to experts, the fundamentals underlying Starbucks stock are not attractive, stretching the valuation.  This combination results in a weak stock price.

Starbucks is still a great company.  The global coffee giant will show good and steady growth for the next several years.  Margins should remain stable and the dividend is safe.  Their balance sheet is secure and SBUX should find itself in a long-term uptrend.  Gains in the medium term will be muted by operational risks and their stretched valuation.  Broadly speaking, the financial markets should present a tide that lifts all ships in the first half of 2019.  As a result, Starbucks’ stock looks like a name to avoid in the near term.

 By Edgar H. Mendoza