Starbucks Hopes a Price Hike Perks Up Profit

Starbucks (SBUX Quote) is raising its prices in a move that may help keep its shares piping hot.

The coffee shop chain quietly announced on Monday that it will be increasing beverage prices at all company-owned stores next month, marking the first time the company has raised prices in more than four years.

Analysts expect the move to help boost sales. "I think they'll be able get away with the price increase without upsetting too many customers," said Carl Sibilski, who covers the company for Morningstar. "This is more of an efficiency issue for them. It's a way to squeeze more out of their existing stores." (Sibilski does not own shares of Starbucks and Morningstar does not do investment banking.)

Starbucks' stock is trading at about 50 times the company's earnings over the past 12 months, a fairly pricey multiple. The only way for investors to justify that valuation is if the company is able to maintain its rapid growth rates -- and its bottom line. ...