Down 9% This Year, What Lies Ahead For Starbucks Stock Following Q2 Earnings?

SBUX: Starbucks logo

[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 Q2 2024 results on Tuesday, April 30. We expect SBUX stock to likely trade higher with revenues and earnings beating expectations slightly in its second-quarter results. The coffee king guided for full-year FY 2024 revenue growth in the range of +7% to +10% year-over-year. Full-year global and U.S. comparable sales growth are forecast to be up 4% to 6% vs. a prior estimate of +5% to +7%. The company held its prior EPS growth and global store growth guidance in check, which means the consensus estimate for full-year EPS of $4.10 is very much in play. 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 $101 per share, which is almost 15% higher than the current market price. Look at our interactive dashboard analysis on Starbucks Earnings Preview: What To Expect in Fiscal Q2? for more details.

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(1) Revenues expected to beat consensus estimates

Trefis estimates Starbucks’ Q2 2024 revenues to be around $9.2 Bil, marginally beating the consensus estimate. The company’s total revenue increased 7.9% during the first quarter to $9.4 billion. The company reported that comparable sales in North America increased 5% in Q1, driven by a 4% increase in average tickets and a 1% rise in comparable transactions. International comparable sales rose 7% during the quarter. China’s comparable store sales increased 10%. The company’s consolidated non-GAAP operating margin rose by 130 basis points from a year ago to 15.8% of sales. The business now has 34.3 million 90-day active rewards members in the U.S., up 13% y-o-y.

Starbucks opened 549 net new stores during the first quarter. The coffee chain ended Q1 with a record store count globally of 38,587 stores, of which 51% were company-operated and 49% were licensed. Also, half of its 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 company’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’ Q2 2024 earnings per share (EPS) is expected at 82 cents per Trefis analysis, slightly above the consensus estimate. Its earnings per share (EPS) was reported at $0.90 in Q1 2024 compared to $0.74 a year ago.

(3) Stock price estimate higher than the current market price

Going by our Starbucks Valuation, with an EPS estimate of around $4.05 and a P/E multiple of 24.8x in fiscal 2024, this translates into a price of $101, which is 15% 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 Apr 2024
MTD [1]
YTD [1]
Total [2]
 SBUX Return -4% -9% 58%
 S&P 500 Return -4% 6% 125%
 Trefis Reinforced Value Portfolio -6% 0% 613%

[1] Returns as of 4/26/2024
[2] Cumulative total returns since the end of 2016

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