Is This a Red Flag for Starbucks?


Starbucks (NAS: SBUX) made waves last week, when it announced its huge $620 million acquisition of Teavana (NYS: TEA) . The price put a 52% premium on the company and has many wondering whether Starbucks overpaid.

The company has been on an acquisition tear recently, which puts up a small red flag for the Fool's Austin Smith. While Starbucks is an incredible operator, he argues that it became great by intensely focusing on its strengths. These moves put the company in new markets and may dilute its energy away from being the great operator we've seen in the past.

See more in the following video.

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Austin Smith owns shares of PepsiCo. The Motley Fool owns shares of PepsiCo, Starbucks, and Teavana Holdings and has options on Starbucks. Motley Fool newsletter services recommend Monster Beverage, PepsiCo, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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