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StarbucksSBUXBUY ON WEAKNESSMar 08, 2023
Stockchase InsightsStock price when the opinion was issued
As of Jun 18, 2026. Market Open.
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Pressures include cash-strapped consumers in China; and some American shave been scared away from Starbucks off by pro-Palestinian protestors who don't realize that Starbucks has no real connection to Israel. IF SBUX's next numbers are weak, the street will conclude that the consumer is trading down from $5 coffee. Wait till their report, though. Is a great brand.
We don’t think negative shareholder equity is a big issue (only problematic for unprofitable companies that need to raise capital to survive). It is just an accounting quirk really as SBUX has repurchased shares aggressively in the past. The company’s operations appear to be out of track once every few years, as management focuses on short-term results instead of customer experience. The founder comes back to reorganize the business once in a while. Based on consensus estimates, sales are expected to grow by 8% over the next few years. Overall, we think SBUX is quite attractive here. Food and beverage overall is a tough industry to be successful in year after year, but given its strong brand name, and attractive valuation, we would be okay to add some here. It has strong international expansion plans and based on consensus estimates we think it could rise north of $100 in the next 12 months.
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Dutch Bros. grew way too fast. SBUX has a problem in China and the U.S. given the Israel-Hammas war. SBUX will miss its next report given weakness in China and the U.S. So buy SBUX $5 lower, because China is reawakening from its slumber and will come back.
He bought it around $70 when China's stores were closed and sentiment was negative. The current CEO targets 5% same-store growth and 10% topline growth and 15% EPS growth, which is do-able. China continues to reopen after an unsuccessful start. Also, global markets will recover, like 4% store growth in North America (projected). Loves SBUX at 21x PE. He targets $120. Was upgraded today.
(Analysts’ price target is $111.50)
Struggling recently, mainly due to sluggish growth in China, which is its second-largest market. An opportunity to own the name. Likes the 15+% growth rate. International, global brand.
Stan WongIt has an 18 to 29% growth rate over the few years along with a 1.3 times PEG ratio. Growth is good especially in China.
Stan WongTrading at 200 day average - which makes good purchase price for long term investors.
Diverse retail footprint across the globe.
Revenues exceeding expectations.
39,000,000 members in digital loyalty membership base (USA).
Expecting major growth in China urbanization.
~2% dividend yield good for income.
Stan WongOutperforming. Bottomed last spring, not last October. Extremely well managed. Widely recognized brand. $36B expected revenue for this fiscal year. Beat revenue and earnings expectations. Stock drop of 9% yesterday is an opportunity. Expanding in US and China. Growing digital space. Yield is 2.02%.
(Analysts’ price target is $114.39)Stan WongToday marks the first day that American business executives can fly to China after three years. Those American companies which already have a strong presence in China can get a major boost from this reopening. The company was thriving before the reopening, so imagine what happens now.
SBUX has performed well recently as the company started refocusing on customer experience, and is now trading at 29x times' P/E. In the 1Q - 2023, SBUX’s revenue grew 8% to $8.71B, slightly missing estimates of $8.78B and EPS was $0.75 slightly missing estimates of $0.77. The balance sheet is quite leveraged, with net debt of $20.6B. Total debt is around 5.0x times trailing twelve-month cash flow of $4.1B, and cash flow declined around 7% compared to $4.4B last year.
With the return of Mr. Schultz, the company has shown some promising operational improvement, especially in North America. Although, SBUX temporarily shut down on the share repurchasing and used that resource to improve and expand the store counts, we like this move and think it would benefit shareholders in the long term. It is trading at a premium valuation, we think the multiple could come down faster as China recovers (i.e. with faster earnings growth).
Mr. Schultz initially mentioned that his current stretch would just be temporary during the time the company searches for a new CEO, he will remain as interim CEO through the first quarter of 2023. We don’t have any particular insight on the magnitude of how the stock will react to that news, although we don't think it would affect the company's fundamental much at that time. We would be comfortable owning this, but do think it needs a multi-year committment. But it is hard to fault it too much.
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