Starbucks Stock To Gain As North America Segment Leads Growth

+7.91%
Upside
79.52
Market
85.81
Trefis
SBUX: Starbucks logo
SBUX
Starbucks

[Updated 02/10/2022] Starbucks Stock

Starbucks’ stock (NASDAQ: SBUX) recently announced its Q1 FY 2022 (ended December 2021) results. The company beat consensus estimates for revenue but missed on earnings. The company posted revenue of $8.1 billion, up 19% y-o-y, driven by an increase in comparable transactions as well as the average ticket size. The revenue growth was led by the North America and U.S. segment. GAAP operating margin increased to 14.6% compared to 13.5% in the same period of the previous year.

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We expect Starbucks’ revenues to rise by 10% to $32.1 billion for FY 2022 (ends September 2022). Further, its net income is likely to increase to $4.55 billion, increasing its EPS figure to $3.84 in 2022, which coupled with the P/E multiple of 30.7x leads to Starbucks’ valuation of $118, which is 21% higher than the current market price.

Below you’ll find our previous coverage of Starbucks stock where you can track our view over time.

[Updated 07/06/2021] Starbucks Stock To Grow As Recovery Continues?

At the current price of around $115 per share, we believe Starbucks (NASDAQ: SBUX) has nearly 8% growth potential in the near term as per Trefis’ Starbucks’ valuation of $124. Due to the coronavirus crisis, SBUX saw its revenue fall by 11% in 2020. The company started recovery in the Q4 2020 (ended September 2020) and Q1 2021 (ended December 2020). The momentum continued in Q2 2021 (ended March 2021) as the company recorded revenue of $6.7 billion, up 11% y-o-y while earnings improved to $0.58 per share compared to $0.28 per share in the same period of the previous year. The revenue growth was driven by the International market as comparable store sales grew by 35% y-o-y. We expect this momentum to continue in 2021 as the pace of vaccination increases.

We expect Starbucks’ revenues to rise by 21% to $28.5 billion for FY 2021 (ends September 2021). Further, its net income is likely to increase to $3.7 billion, increasing its EPS figure to $3.17 in 2021, which coupled with the P/E multiple of 39.1x will lead to Starbucks’ valuation of $124, which is 10% higher than the current market price.

[Updated 11/19/2020] Starbucks Stock Might Not Have Any Upside?

Having gained more than 73% since the March bottom, Starbucks’ stock (NASDAQ: SBUX) is close to its near term potential. Our conclusion is based on a detailed comparison of SBUX’s performance against the S&P 500 now as well as during the 2008 downturn in our interactive dashboard analysis.

Due to the Covid-19 crisis, Starbucks, an American multinational chain of coffeehouses, has seen its revenues fall during FY 2020 (ended September 2020). In FY 2020, Starbucks reported an earnings beat with EPS of $0.79 and total revenues at $23.5 billion, down 11% y-o-y. Further, the company reported $1.6 billion in cash inflows from operating activities for the year.

We expect Starbucks’ revenues to recover after a Covid affected year and rise by 21% to $28.5 billion for FY 2021. Further, its net income is likely to recover to $3.7 billion for FY 2021, with the EPS figure expected to be at $3.17, which coupled with the P/E multiple of 32.3x will lead to a Starbucks valuation around $102.

 

[Updated 03/25/2020] Will Starbucks’ Stock Rebound 50% Post Coronavirus?

Starbucks‘ (NASDAQ: SBUX) stock declined from about $75 on March 6th to $65 as of yesterday, March 24th – a 14% drop (vs. an 18% decline in the S&P 500 during the same period). The World Health Organization (WHO) had declared a global health emergency at the end of January in light of the coronavirus spread. SBUX stock has lost 23% from its closing price above $84 on Friday, January 31st (vs. about 27% decline in the S&P 500).

Looking back at the 2008 financial crisis, we see SBUX stock declined from levels of around $11 in October 2007 (the pre-crisis peak) to below $4 in March 2009 (as the markets bottomed out) – implying SBUX stock lost as much as 65% from its approximate pre-crisis peak. This marked a higher drop than the broader S&P, which fell by as much as 51%. However, SBUX recovered strongly post the 2008 crisis, to levels of almost $10 in early 2010, rising by 152% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

On Monday, March 9th, the stock market entered into a phase of extreme volatility, with two significant sell-offs on Monday and Thursday being separated by days of partial recoveries. Overall, there have been two distinct trends driving the recent sell-off. Firstly, the increasing number of Coronavirus cases outside China is causing mounting concerns of a global economic slowdown. Secondly, crude oil prices plummeted by more than 20% after Saudi Arabia increased production.

SBUX stock has suffered as states and countries are on lockdown. People are not meeting friends and colleagues or going out with family for breakfast, drinks, lunch, or dinner. Restaurants and food outlets are operating in the take-out-only mode, and many are closed. Besides lower demand, the supply chain across the world is suffering, which will also weigh on sales. We believe Starbucks’ Q2 and Q3 results will confirm this reality with a drop in both International and Americas revenues.

The actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard Trends In U.S. Covid-19 Cases provides an overview of how the pandemic has been spreading in the U.S. and contrasts with trends in Brazil and Russia. With investors focusing their attention on 2021 results, the valuations become important in finding value.

 

Check out how Starbucks’ Peers fare on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Returns Feb 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 SBUX Return -1% -17% 75%
 S&P 500 Return 2% -4% 105%
 Trefis MS Portfolio Return 2% -8% 264%

[1] Month-to-date and year-to-date as of 2/10/2022
[2] Cumulative total returns since the end of 2016

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