Is Starbucks Corporation (SBUX) a Buy?

McDonald’s is a fairly unattractive stock right now. The firm missed analyst estimates by $0.01 last time. Earnings and revenue increased during the recession, as the company often caters to those wanting to conserve money. Now that the economy is recovering, it won’t just be the coffee sales that McDonald’s Corporation (NYSE:MCD) loses out on, but the entire menu probably.

Morningstar gives McDonald’s a fair price of $105, while it is hovering around $100 lately. However, the fast-food industry is increasingly competitive, and I see share price falling. But before ruling the stock out, you should consider the massive advertising budget ($788 million in 2012). That could sell a lot of coffee. In short, you may want to check up on McDonald’s every quarter to see if it is actually losing market share to Starbucks. If not, it may be worth a buy.

Starbucks looks strong

With consumers nearly fully recovered from the recession, Starbucks Corporation (NASDAQ:SBUX) and its high-end coffee brand look to become reacquainted with lost customers. Having that in mind, I would wait until the court settlement that could lead to Starbucks having to pay Kraft the $2.9 billion. If that happens, a sell off would likely ensue, providing investors with a chance to get in on this rapidly expanding company.

The article Is Starbucks a Buy? originally appeared on Fool.com and is written by Phillip Woolgar.

Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends McDonald’s and Starbucks. The Motley Fool owns shares of McDonald’s and Starbucks. Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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