Things to know before buying starbucks stock


Investing in the stock market is an exciting prospect. The right investment tips may help you meet your personal financial goals, like achieving a more fulfilling lifestyle, or building security for the future. At the same time, the risks of making a wrong choice and losing significant dollars are intimidating enough to discourage many from getting into the market at all.

Spend some time learning about the market before diving in, to build your confidence and gain a better understanding of the risks and opportunities. Take advantage of the free educational tools and apps on a site like Drive Wealth Education. You can learn how to plan your investing, improve your understanding of the market, and have a chance to practice new skills for no cost.

How to Evaluate a Stock Pick

When you consider buying a stock, you are actually considering buying that company. In every instance there are pros and cons. Any business is subject to influences beyond its control, like general economic trends, international political issues, and more. The only way to successfully assess a company and its stock is to look at the long view, over a period of time.

Learn how to compare a company’s price to earnings—or P/E—ratio to the overall market, to assess how expensive one stock is compared to others. Read the expert analyses widely available online for all levels of investors.

Start with the familiar when reviewing possible investments. Consider websites you use, or retailers you love. If you think about coffee—and, let’s be honest, most of us think about it every morning—chances are you think about Starbucks. Starbucks has become practically synonymous with coffee.

Over the last five years, Starbucks stock has gone up more than 250%. However, it stands to reason that what goes up must come down. So, the question becomes whether Starbucks is going to continue rising, hit a plateau, or drop. Factors to consider:

  • Looking at past growth and growth potential, it is easy to see that Starbucks has its sights set for continued growth. They started out catering to coffee drinkers, and they continue to produce consistent sales growth, while expanding into new product offerings.
  • Starbucks financial results consistently show a profit every year. Their expenses stay around the same, except for those areas in which they are testing expansion, and their bottom line is quite generous. A generous bottom line can be paid out in dividends.
  • Future earnings growth will be affected by fluctuating costs in Starbucks’ fundamental commodities, coffee and milk. The unknown effects of climate change and coffee crop concerns could lead to a tug-of-war between rising prices to maintain margins, and limiting price increases to maintain customer loyalty.
  • The result would directly impact earnings, and, depending on the trend (up or down), your very high-priced investment could lead to an equally high-priced fall.

 

Is Starbucks the right stock for you? Only you can make that call. Be sure to do your homework before deciding on this or any other stock. Get to know the basics of how the stock market functions, and read everything you can about your prospective company. Take full advantage of online educational tools, and start with a reasonable investment for your financial profile.

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