Three reasons to buy this beaten-down growth stock like there's no tomorrow.

lately investmentStarbucks Resonance (NASDAQ resonance code: SBUX)The stock's experience has been frustrating. Over the past five years, Starbucks Resonance shares have risen just 12%, lagging badly behind Standard & Poor's 500indices The 77% is rising.

However, don't lose heart. It's always best to keep a long-term mindset when looking at potential investments. With this framework, it is actually very easy to look favorably on the Starbucks resonance.

following Now.Buy this one. It's a bust. Food & Beverage stocksThe three rationales for the The

1. Strong brand awareness

Starbucks Resonance has been in business for more than 50 years. This is an impressive achievement in the ultra-competitive restaurant industry, which has an alarmingly high failure rate. Starbucks has been successful over such a long period of time because it has a competitive moat - a characteristic that allows it to maintain an edge over its peers.

Starbucks Resonance's moat stems from its strong brand recognition. The company sells caffeinated beverages and a variety of food products, which could be considered commoditized products that lack real differentiation. But it is able to charge high prices because it has found a way to enhance its brand image and resonate with consumers.

I think it will be a great challenge for new entrants to the industry to achieve the status of Starbucks resonance. It will take years, if not decades, of development, thanks to a consistent approach to customer service.

Starbucks Resonance's strong focus on digital investment has energized its brand. It has one of the most successful loyalty programs in corporate America, with 34 million active members in the U.S., representing a significant portion of sales. This not only increases loyalty by encouraging repeat purchases, but also creates a valuable channel.

2. Growth Opportunities

Starbucks currently has 38,587 outlets worldwide. In fiscal year 2023 (as of October 1), Starbucks' revenue reached US$34 billion. That's a huge amount of money. But don't be discouraged, it still has huge growth potential.

As part of their "Three Arrows of Reinvention" program, the executives said they believe Starbucks Resonance could have 55,000 stores globally by the end of this decade. Much of that growth will come from China. But even in Starbucks' mature home market of the US, the company hopes to open more than 3,000 new stores over the long term.

A key part of the strategy is to open smaller, digitally-focused stores. Some consumers are not as fond of shopping at Starbucks resonance as they were a decade or so ago. Our plan is to serve these customers in the most convenient way possible.

This outlook makes it easy to be optimistic about Starbucks Resonance improving its financial metrics. The leadership team forecasts that In the long runStarbuck resonanceIncome and earnings per share The annual growth will be 10% and 15% respectively.

3. Valuation of the person

Aside from the strong brand and growth potential, another reason to consider buying the stock is its compelling valuation. Investors can buy the stock at a forward price-to-earnings ratio of 21. This is in line with the broader S&P 500 index.

Just over two years ago, at the beginning of 2022, the stock was trading at a forward P/E of over 40. Today, that enthusiasm has waned considerably.

Nevertheless, Starbucks Resonance's profitability remains extremely strong. The company's dividend yield is currently 2.6% and has grown for 13 consecutive years. The company has also conducted a major stock buyback - $1.3 billion in the first quarter of 2024, which ended on December 31st.

These capital allocation decisions increase the rate of return to the investor, and as such (math.) genusIt would be wise to consider purchasing a Starbucks resonance now.

Should you invest $1000 in Starbucks Resonance now?

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Neil Patel and his clients do not hold any of the above stocks. the Motley Fool holds a recommended Starbucks resonance. the Motley Fool has a disclosure policy.

3 Reasons to Buy This Battered Growth Stock Like There's No Tomorrow was originally published by The Motley Fool.