Here’s Why We Have Revised Our Price Estimate For Starbucks To $52
Starbucks (NASDAQ: SBUX) reported its fiscal year 2017 results in November 2017 and based on those numbers we have updated our model to reflect the company’s latest financials and future guidance. The company has been struggling to grow comparable sales as it faces operational issues in its restaurants and competitive pressures. Based on its Q4 2017 and fiscal year 2017 the company revised its long term growth targets to comparable sales growth in the range of 3% to 5% and revenue growth in the high single digits. The company’s margins were also negatively impacted in Q4 2017 due to partner investments and product mix shift. While the company expects margins to improve going forward as it gains sales leverage, we have revised our margin forecast for Starbucks’ company operated stores from our earlier forecast of around 20% to a range of 18.8% to 19.5%.
Click here to see our EBITDA margin forecast for Starbucks’ Company Operated Stores.
We have modified our assumptions for revenue growth for the company based on its long term guidance. We expect revenues from company operated stores to increase at an average of around 6% for the next four years and grow at a faster rate thereafter, as the company starts gaining from its Roastaries and a focus on gourmet coffee.
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Click here to see our Revenue forecast for Starbucks’ Company Operated Stores.
For Starbucks’ licensed stores, based on the company’s long term guidance, we have modified our EBITDA margin assumptions from 79% to 76% over our forecast period.
Click here to see our EBITDA margin forecast for Starbucks’ licensed stores.
Similarly we have modified our revenue forecasts for the company’s licensed stores based on the guidance.
Click here to see our Revenue forecast for Starbucks’ Licensed Stores.
Starbucks’ growth has slowed down in the recent quarters and we have revised our forecasts based on the new growth prospects, leading to a decrease in our price estimate. Our current price estimate is slightly lower than the company’s market price and we may update this estimate after its Q1 2018 results.
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