Here's why Cramer likes Starbucks stock

A recent report from the Wall Street Journal said Starbucks Corporation (NASDAQ: SBUX) was running low on cups at some of its stores. CEO Kevin Johnson of the coffee chain, however, rebutted the report in an interview with Jim Cramer on Mad Money.

“There’s no cup shortage at Starbucks. We have also introduced the reusable cups again that were discontinued during the pandemic for safety reasons. Customers are back to our stores, demand is up, and we have plenty of cups to serve them,” said Johnson.

Johnson also highlighted that comparable sales were surpassing levels seen before the pandemic in markets where consumers were vaccinated.

Jim Cramer’s remarks on CNBC’s “Squawk on the Street”

Discussing his interview with the Starbucks CEO on CNBC’s “Squawk on the Street”, Jim Cramer highlighted that cold drinks were contributing over 50% to Starbucks’ overall beverage sales, which meant better margins. He said:

“Basically, you’re getting good margins and better than expected sales at stores in regions where vaccination is up. So, the stock is a buy.”

According to Cramer, contrary to recent reports, the number of new products and innovation at Starbucks is at an all-time high. The percentage of tickets that includes some food is up as well. While CEO Johnson acknowledged that Starbucks faces some supply issues, Cramer opines that it’s true for many companies as the U.S. economy has not yet completely recovered from the impact of the COVID-19 crisis.

An overview of the Starbucks stock

Starbucks is currently about 5% down from its record high of over $118 per share. The false reports of shortages and lack of innovation, Cramer said, contributed a lot to the recent pullback. Now that the reports have been refuted, the stock is likely to recover in the future. All in all, Starbucks, as per the Mad Money host, is a buy at the moment.

Starbucks is currently exchanging hands at $113 per share versus $103 per share at the start of the year. The stock has recovered from a low of $58 per share in March 2020 when COVID-19 pushed its stores into temporarily shutting down.

Starbucks, however picked up in the back half of 2020 and closed the year with an over 20% gain in the stock market. At the time of writing, the Seattle-headquartered multinational has a market cap of $133 billion and a price to earnings ratio of 135.17.