Down 7% Since 2023, Can Starbucks’ Stock Reverse This Trend Post Q1 Results?

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SBUX: Starbucks logo
SBUX
Starbucks

[Note: Starbucks’ fiscal year 2023 ended October 1]

Starbucks stock (NASDAQ: SBUX), the world’s leading roaster, marketer, and retailer of specialty coffee worldwide, is scheduled to report its Q1 2024 results on Tuesday, January 30. We expect SBUX stock to likely trade higher with revenues matching and earnings beating expectations slightly in its first-quarter results. SBUX’s FY 2023 revenue was 35% higher than FY 2019 levels and its operating margin increased 900 basis points during this period. The coffee king’s FY’23 comp sales rose despite people having less money due to rising interest rates. On top of this, Starbucks indicated that comp sales will grow between 5% and 7% in fiscal 2024, due in part to digital engagement and customer loyalty. Starbucks expects to grow new stores by 7%, with three-fourths of those new stores coming from outside the U.S. The company expects 10% to 12% sales growth and 15% to 20% GAAP and non-GAAP EPS growth in fiscal 2024. All told, Starbucks has consistently raised its dividend since it started paying one in the year 2010 and it will likely continue to rise going forward. In the long run, Starbucks’ dividend growth and rising earnings provide the momentum necessary to justify a higher valuation.

Our forecast indicates that Starbucks’ valuation is $102 per share, which is almost 10% higher than the current market price. Look at our interactive dashboard analysis on Starbucks Earnings Preview: What To Expect in Fiscal Q1? for more details.

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(1) Revenues expected to beat consensus estimates

Trefis estimates Starbucks’ Q1 2024 revenues to be around $9 Bil, marginally beating the consensus estimate. In fiscal 2023, Starbucks booked a 12% year-over-year (y-o-y) revenue growth to almost $36 billion, led by an 8% comps growth. The chain posted a healthy balance between rising customer traffic and increased spending, too. The company’s global store count was over 38,000, in line with its store growth guidance of 7% in fiscal year 2023. Half of the SBUX stores are located in international locations. By 2030, the goal is to have 55,000 locations running globally – of which China will be a major growth market. The important question here is can the brand continue to expand since it is already ubiquitous? The coffee giant’s management could likely be overly optimistic about its long-term expansion prospects.

2) EPS is also likely to beat the consensus estimates marginally

Starbucks’ Q1 2024 earnings per share (EPS) is expected at 90 cents per Trefis analysis, 5% above the consensus estimate. Its earnings per share (EPS) of $3.58 was up 26% y-o-y in FY 2023.

(3) Stock price estimate matches the current market price

Going by our Starbucks Valuation, with an EPS estimate of around $4.13 and a P/E multiple of 24.8x in fiscal 2024, this translates into a price of $102, which is 10% higher than the current market price.

It is helpful to see how its peers stack up. SBUX Peers shows how Starbucks’ stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

Returns Jan 2024
MTD [1]
Since start
of 2023 [1]
2017-24
Total [2]
 SBUX Return -4% -7% 67%
 S&P 500 Return 3% 28% 119%
 Trefis Reinforced Value Portfolio 0% 39% 612%

[1] Returns as of 1/29/2024
[2] Cumulative total returns since the end of 2016

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