Why Starbucks is Still One of the Best Restaurant Stocks

THElike most catering industry, Starbucks (NASDAQ: SBUX) encountered headwinds early in the pandemic, but the business has rebounded vigorously thanks to a strong digital channel, the contribution of drive-thru stores, and the ability to adapt its stores to changing needs, including social distancing.

In this segment of The five, registered on September 1, Fool.com contributors Jeremy Bowman and Jason Hall explain why Starbucks seems like a great choice for salvage stock.

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Jason Hall: Today we have the payroll report from ADP. The largest private payroll service manager in the US gives us a huge payroll report which is handy. Said private payrolls increased 374,000 jobs last month, so in August. This was about 40 percent below expectations for 600,000 new jobs. Of course, the vast majority of these jobs were in the service, recreation, hospitality industry. I think over 200,000 of them, 374,000 were jobs in the leisure and hospitality industry. We are not economists, we are not labor experts, but we love to invest, we love stocks. Let’s talk about our favorite hospitality actions. Trevor, I’m going to give you a little break and let Jeremy talk and see, he wasn’t with us the whole hour. Jeremy, you make us come here first.

Jérémy Bowman: I just want to make a point as well on what you are saying about economists. I think as an investor you assume that a good jobs report is going to push stocks up. It doesn’t always work that way based on interest rates and the Fed and all that. It is a difficult game to play. As far as my favorite hospitality store or what I really like is Starbucks, I think they are almost synonymous with the word hospitality in the restaurant space. I think of Howard Schultz, who wasn’t technically the founder, but who basically founded the company.

Jason Hall: He is the founder, as far as we are concerned, he is the most affectionate.[laughs]

Jérémy Bowman: He should have the title I think, but he bought it when it was like a handful of coffee bean vendors. But he designed it as a third place you can get in and out, whatever you want. I think Starbucks for the fast food chain basically, their staff are probably more professional than what you might find in a competitor or a typical type of fast food business. I think it’s long term in the business. I mean, they had a setback during the pandemic like most restaurant chains, but they have recovered well. They have a long track of growth in China. Their rewards program works very well and creates competitive advantages and barriers to entry there. I think they’ve been at the forefront in a lot of the tech stuff that we’ve seen coming out with restaurant chains like Chipotle during the pandemic, their mobile application.

Jason Hall: We’ve talked about this digital flywheel, haven’t we? That’s it.

Jérémy Bowman: Yes. Exactly. You get customers addicted to it. It gets, I mean, coffee caters to a repeat customer anywhere, but they make it so easy that even if you have an independent cafe or when you want to go, Starbucks makes it really easy to pop right there. -in, you just need to place your order on the app, then stop and pick it up. I think we will definitely see what happens with the economic recovery in the future. Starbucks is going to be. People going back to school and to the office and all that is good. It will be a good thing for them. I think the company should continue to do well.

Jason hall has no position in any of the stocks mentioned. Jeremy bowman owns shares of Chipotle Mexican Grill and Starbucks. The Motley Fool owns stock and recommends Chipotle Mexican Grill and Starbucks. The Motley Fool recommends the following options: $ 120 short calls in October 2021 on Starbucks. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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