S&P Capital IQ: 'We Like Starbucks, It's Just The Valuation That Gives Us Some Pause'

Shares of coffee major Starbucks Corporation SBUX have appreciated over 40 percent year-over-year trading near their all-time highs and that’s causing anxiety among some market participants.

Among them is Efraim Levy of S&P Capital. Levy was recently on CNBC to discuss why his firm has a Hold rating on the stock.
 

Hold Because Of Valuation

“This is a one of the leaders in the segment,” Levy said. “There’s others participants in the industry who are able to grow their business through a combination of new stores and comparable store sales. But this is a company that we have a hold because of the valuation. We had a buy for three years until earlier this year. We just think right now there’s more risk reward proposition that’s hurting.”

Expensive Valuation Of Restaurant Stocks

On the overall valuation of the restaurant stocks, Levy said, “Well we think that in general the segment of restaurants are quite pricy. We actually have a sell for example on McDonalds and that has its own issues, but we think that right now the market is just very expensive for this segment.”

Like The Story

Levy was asked that Starbucks is not a tech stocks hence even after having appreciated much are there any chances that it could go down as swiftly. He replied, “I think that there are supportive fundamentals there. We look [at] with our hold opinions based on the next 12-months. We think that this going to grow for years, but right now we think that it may be more attractive.”

“We are not saying when we will change our opinion, but if it pulled back, we are always going to review it, but we like the story, it’s just the valuation that gives us some pause,” Levy concluded.