Why Has Starbucks’ Stock Price Stagnated In The Year So Far?
Starbucks’ stock price has stagnated around the mid-50s since the beginning of the year, despite showcasing growth in every quarter in revenues and comparable sales.
In the following note, we discuss the key reasons behind Starbucks stagnating stock price:
- Missing The Consensus Estimates
- Down 9% This Year, What Lies Ahead For Starbucks Stock Following Q2 Earnings?
- Down 7% Since 2023, Can Starbucks’ Stock Reverse This Trend Post Q1 Results?
- Down 26% From Its Pre-Inflation Shock High, What Is Next For Starbucks Stock?
- After 6% Drop This Year, Pricing Growth To Bolster Starbucks’ Q4
- Can Starbucks Stock Return To Pre-Inflation Shock Highs?
- Starbucks’ Stock To See Little Movement Past Q3?
For two quarters, Starbucks has been missing the consensus estimate for revenues slightly, while meeting it for EPS. This has led to an over-reaction from market participants, who chose to overlook Starbucks’ significant top-line growth, undeterred by the industry-wide traffic deceleration and macroeconomic changes that other players in the industry have been suffering from.
- Slowdown In Comps
Historically, Starbucks’ levels of comparable store sales growth have been at or above 5%. In a shocking move for the investors, the June quarter saw this metric coming down to 4%, impressive when compared to other players in the quick service restaurant marketplace, but very far from Starbucks’ recent 8%-9% levels. The fall in the metric was primarily seen in the Americas. Furthermore, the CAP (China and Asia Pacific) region’s comparable sales were also seen at a lukewarm 3%. China is one of the major growth contributors to the company. The company is betting on its success in China to push its valuation higher. In the face of a slowdown in comps, investors reacted negatively, resulting in a fall in its stock price.
- Changes To The Loyalty Program
Starbucks recently changed its loyalty program from one based on frequency to the amount spent. The earlier program gave perks for frequent visits, while the new one gives loyal customers free drinks depending on how much they spend. Starbucks made the change to eliminate in-store operating issues and order splitting, to increase the speed of service and reduce line attrition. This likely discouraged customers, leading to a slower turnaround at the cash register. However, the company remains confident about this shift, expecting it to be a pivotal point for its business.
- Rising Coffee Bean Prices
Robusta and arabica coffee bean prices are at an 18-month high due to the arid weather conditions in Brazil and Vietnam and a global supply shortage. The higher coffee prices may make a dent in consumers’ coffee obsession, causing people to move to cheaper alternates. This doesn’t bode well for a giant like Starbucks, which is highly dependent on coffee sales for revenue growth.
Have more questions on Starbucks? See the links below.
- K-Cups, Expansion In China Drive Growth For Starbucks In The June Quarter
- Starbucks Q3 FY 2016 Earnings Preview: Continued Focus On China, Expansion Of The Single-Serve Segment To Drive Results
- Starbucks’ Expansion Plans in China & Digital Channels Drive Growth In Q2 FY 2016
- How Has Starbucks’ Revenue And EBITDA Composition Changed Over 2011-2015?
- By What Percentage Have Starbucks’ Revenues And EBITDA Grown Over The Last Five Years?
- What Is Starbucks’ Revenue & EBITDA Breakdown?
- What’s Starbucks’ Fundamental Value Based On Expected 2016 Results? (Updated After Q2 FY’16)
- Starbucks Q2 FY 2016 Earnings Preview: New Developments In China/Asia Pacific Region To Steal The Limelight
- Where Will Starbucks’ Revenue And EBITDA Growth Come From Over The Next Three Years? (Updated After Q2 FY’16)
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