Starbucks gets a Downgrade - Time to Buy

Goldman Sachs downgraded Starbucks Corp. (NASDAQ:SBUX) today to "Neutral" from "Buy" and reduced their 12-month target price to $26 from $27. SBUX shares are down 38% this past year and now the Masters finally like the stock.

Goldman said due to slower domestic same-store sales growth, concerns about U.S. competition and saturation, declining performance of new stores and weakening margins Starbucks gets the thumb down. The analyst said SBUX shares are unlikely to recover in the near-term given a weak consumer spending climate.

However Goldman did say they like Starbucks long-term outlook due to its strong coffee shop locations in the U.S., and its solid infrastructure for overseas growth.

The Masters see SBUX as a great buying opportunity to weather the storm of the upcoming Recession.  Shares of Starbucks are cheap enough now that it's worth the risk.  People will still treat themselves to a Starbucks Latte here, a Mocha there, and all their baked goods to help them forget about the crappy economy.  We've been saying as has Todd Sullivan that Starbucks was the loser and McDonalds (MCD) was the stock to pick, and that's obvious now with MCD at a new 52-week high and SBUX less than 50 cents away from a new low.  Besides if Britney still gets her Starbucks on, you know America will come to her rescue (both Spears and SBUX).  Isn't she lovely?

Starbucks is one of those 'safe' stocks, people buy shares in SBUX because they can believe that despite the slow growth, its a sure thing the share price will return later in 2008 to the high $20's.  Starbucks, despite what the analysts on Wall Street may say is one of the most popular stocks for American IRA's and ROTH IRA's.

Goldman didn't say Starbucks is a bad stock, they said for now it's not so great, but long-term, it's still money in the bank.

Article written by Eric Cheshier

Co-Founder of theStockMasters.com

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