Is Starbucks Undervalued?

I like coffee. And it seems that a lot of people like coffee too. Pershing Square thinks Starbucks is one of the world’s best businesses and that it’s undervalued. Here’s their analysis.

Key takeaways are:

  • Dominant brand in a growing category

  • Exceptional returns on each new store built (1$ —> 10$)

  • Huge margins for new stores (30%) – no kitchen needed, lucky them!

  • Mobile order is actually a big thing for them – not just a gimmick

  • China loves Starbucks – they’ve been there for 20 years