Starbucks Steeped in Froth

On Wall Street, great success breeds great expectations, and the stock market's reaction to the second-quarter earnings figures released late Wednesday by Starbucks (SBUX Quote) serves as a perfect example of the traps that can ensnare investors as a result.

The Seattle-based coffee empire sits atop Wall Street's totem pole of admired companies after bringing its so-called coffee culture to the masses. The company consistently outperforms across the board, defying skeptics, and its recent foray into entertainment channels shows that Starbucks is one of those rare companies that can redefine the boundaries of its brand.

The java giant's second-quarter results were no exception to the growth story. It posted a 27% gain in net income, beating expectations, and raised its earnings targets for 2006. Despite all that, the stock sold off after hours -- probably because the 6% comp-sales growth it posted for April merely matched estimates and didn't top them. ...