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Starbucks (NASDAQ:SBUX) Beats Expectations in Q1

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Starbucks Corporation (NASDAQ:SBUX) released its first-quarter results on Thursday which continued to show some strong growth from the popular coffee chain. With both sales and profits coming in above expectations, the stock could see some positive movement from the news and it was up around 2% in after-hours trading.

Here’s a quick recap of how the company did this quarter:

Is there too much competition?

Once a company starts hitting 3-4% in sales growth, that’s a sign that’s starting to reach a ceiling. At that low of a level, price increases could be the catalyst behind such ‘growth.’ There’s a lot of competition when it comes to coffee these days and the ability for Starbucks to convince people to spend more on its premium blend than a cheaper option across the street might be less likely, especially with possibly tougher times ahead for the economy.

Besides it loyal customer base, persuading someone to spend more on coffee can be a tough sell. It’s perhaps no surprise then that the stock has risen just 8% in the past year. The hype around the brand is starting to fade. And with a price-to-earnings multiple of just 20, investors aren’t willing to pay the same premium for the stock that Starbucks customers shell out for its coffee.

Should you buy Starbucks stock?

Starbucks is not too far away from its 52-week high and while the results were good to start the new fiscal year, I wouldn’t expect much more upside from the stock. And with fears of a recession coming, that could spell bad news for Starbucks as its coffee could be an easy target for customers who suddenly find themselves looking to shed costs.

While long term the brand looks to be solid and has great financials, there are simply better growth stocks out there to invest in than Starbucks.

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