Thursday, February 02, 2006

Starbucks Steams Profits

It's never about the money -- it's how well you build an enhanced experience around your core competencies.

Oh, and it helps if you treat your employees right.

On that front, coffee king Starbuck's (SBUX) ripped the cover off the ball Thursday morning by boosting profits and raising forecasts. Shares rallied 10% on the news.

The company cited terrific growth in China. Goldman Sachs liked it -- they issued a $41 price target.

Look for Starbuck's earnings to accelerate sharply as the company expands and leverages its brand equity.

Careful, competitors: Starbuck's contents are hot.

And to think that the tiny and unprofitable Caribou Coffee (CBOU) ever had a modicum of a chance.

Caribou Coffee, which operates ski-lodge formatted coffeehouses in the United States, went public recently.

Insiders at Caribou are buying stock like madmen, but the company couldn't make a dime if their life depended on it.

The trade here is a lay-up: long SBUX; short CBOU. We have a $5 price target on Caribou.

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