Now that people are heading back to work in traditional offices, stores and places outside of the home, that much more coffee will be consumed on-the-go. Furthermore, coffee consumption has the potential to increase at home simply because people want to be energized ahead of social interactions in public settings.
Coffee stocks such as Starbucks (SBUX), Dunkin’ Brands Group (DNKN), Farmer Brothers Company (FARM) and Coffee Holding Co. (JVA) are worthy of investors’ attention.
Starbucks (SBUX)
Fewer people are likely to sit down in coffee shops for an extended period of time as a result of the coronavirus outbreak. Though the chances of transmission have decreased, consumers will still hesitate to spend hours in social settings such as coffee shops.
As SBUX fans know, the majority of the coffee company’s customers purchase java through the drive-thru or get it to go. Fewer and fewer SBUX customers are sitting in actual stores, socializing with others, working or killing time on-site. This is in stark contrast to traditional coffee shops that largely depend on a welcoming restaurant-like atmosphere conducive to social interaction.
In short, the threat of the looming coronavirus will not significantly affect SBUX. Take a look at the analysts’ high target for SBUX and you will find a high target of $100.
SBUX is in the top five of 48 restaurant stocks graded in the POWR Ratings. The company has a B overall grade with an A Peer Grade and a three-month price return in excess of 12%.
SBUX will undoubtedly enjoy an uptick in business thanks to the misfortunes of Luckin Coffee. Furthermore, SBUX coffee is superior to the competition’s, proving especially popular amongst the uber-important millennial age cohort.
Dunkin’ Brands Group (DNKN)
It is difficult to find a coffee shop more ubiquitous than DNKN. If you live in or near any major city, there is likely at least one DNKN store near you. Though DNKN coffee does not taste as good as SBUX or Peet’s, it is good enough, particularly if you are in a rush and need a pick-me-up. Furthermore, DNKN breakfast sandwiches are tasty enough to lure in customers who are also likely to purchase java.
The POWR Ratings have DNKN rated in the top 15 of nearly 50 Restaurant stocks. The company has a B Industry Rank and Peer Grade along with a one-month price return of nearly 8%. Currently priced at $71, DNKN is trending toward its 52-week high of $84.74.
It is hard to believe this stock fell below $40 amidst the coronavirus outbreak. After all, DNKN drive-thru windows remained open throughout the majority of the pandemic. Look for DNKN to make an upward move as the economy reopens.
Farmer Brothers Company (FARM)
Now that the economic activity is resuming, people will be out and about, spending time at restaurants, fast food outlets, hotels, convenience stores, etc. FARM provides coffee to these facilities. FARM was trading around $19 this time last year. The stock is now priced at $11.
FARM has produced a 3.75% three-month return and an impressive 25.37% price return across the past month. With a long-term earnings growth rate just under 10%, this stock is worth keeping an eye on, especially for those seeking a risk-averse investment.
Coffee Holding Co. (JVA)
If you are hesitant to invest in coffee shops due to customers’ potential reluctance to spend time in restaurants as the coronavirus lurks, you are not alone. However, this does not mean you have to avoid the entire coffee industry as an investor.
JVA provides you with the opportunity to invest in wholesale coffee operations including the manufacture and distribution of coffees. JVA operations include private label accounts as well as its own unique brands, some of which are notable for their green qualities.
Take a look at the POWR Ratings and you will find this stock is highlighted by its solid Industry Rank and its one-month price return of 14.28%. The stock produced more than a 30% price return in 2019.
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About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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