By Paul Honda
paul@hondareport.com
Thursday, June 21, 2007

I've written that I spend quite a bit of time in Starbucks even though I'm not a drinker of hot coffee.

I'll have a vanilla bean frappuccino. Or a hot cocoa. Or a hot tea. I don't like paying $3 or $4, but in return I have someplace to sit and do some work or surf online (my own connection) while plugging in to the store's power outlet. This is a huge plus considering most other places frown upon this. Zippy's, for example.

So as I've patronized Starbucks while waiting to pick up family from school or other places, I've come to appreciate the atmosphere, the ambiance. The music, the service, the availability of restrooms.

Getting to know the brand and the bricks and mortar intimately has kept me glued to the business side of the Co. For the past year, Starbucks has struggled with growth, i.e. saturation in the West is happening, even as Hawaii is still seeing new stores pop up.

Today, news came out that Starbucks will help out long-suffering Ethiopian coffee farmers. Ethiopia had been given the symbolic stiff-arm for decades from the world's coffee brokers (mainly Europe and the U.S.). This move to promote the Ethiopian brand is a win-win for both sides.

What's hurting the SBUX stock now though is a lack of growth. They need China more than ever.

Oolong tea, anyone?

SBUX chart: The stock has broken through a support level at $27 ... next level of support is $24. Last tme it was 24 was in October, then it ran to almost 39. I think it's still too expensive right now at 26. The P/E is 33 ... I'd rather buy it if/when the P/E is 25-28.

Disclaimer: Pupule Paul does not own shares of this company.

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