Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Starbucks: Still A Buy After 70% Jump In One Year?

By Investing.com (Haris Anwar/Investing.com)Stock MarketsApr 06, 2021 09:30AM ET
www.investing.com/analysis/starbucks-still-a-buy-after-70-jump-in-one-year-200571389
Starbucks: Still A Buy After 70% Jump In One Year?
By Investing.com (Haris Anwar/Investing.com)   |  Apr 06, 2021 09:30AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The global coffee-chain operator, Starbucks (NASDAQ:SBUX), proved to be a great bet during the pandemic. Its shares have not only recovered from last year’s losses, but they also massively outperformed other global food chains.

This remarkable turnaround comes after a severe blow to its business as COVID-19 spread globally, forcing offices to close and daily customers to stay at home. In the most recent quarter, global, same-store sales, a key gauge of restaurant success, dropped 5%, which is more than what analysts were expecting.

Despite this uneven recovery in sales and a still-raging pandemic in many parts of the world, a strong rebound in Starbucks shares suggests investors believe the worst is over for the Seattle-based company. 

During the past six months, SBUX has jumped 24%, almost double the gains that the Dow Jones Restaurants & Bars Index has produced. The stock closed Monday at $111.02, up more than 70% from its March 2020 dip.

As shares hover near an all-time high, it’s reasonable to question whether this stock is still a buy. Could it be that much of the good news has already priced in?

Starbucks Weekly Chart.
Starbucks Weekly Chart.

Many analysts believe Starbucks is back on a growth path after a tumultuous year as the reopening in its two biggest markets, the U.S. and China, will bring back sales and expansion in profit margins. These markets together make up 61% of the company’s global portfolio, with 15,340 and 4,863 stores, respectively. 

Strong Growth Is Returning 

Sales are forecast to grow 21% this year, to a record $28.5 billion. Analysts also see a 142% recovery in earnings to $2.83 a share. In 2022, they forecast another 22% growth in earnings. If the reopening of the global economy remains on track, these projections could even prove to be conservative.

According to a recent note by analysts at BMO, Starbucks has the potential to outperform the current market expectations as the global economic reopening accelerates. The note said:

“We view SBUX as a reopening beneficiary with meaningful potential upside to FY21/FY22 consensus, partly driven by comp contributions from sales transfer due to the U.S. asset base transformation, accelerating digital momentum, easing competitive dynamics in China and steeper margin recovery.”

Another reason that could fuel more gains in Starbucks is the company’s aggressive push to restructure its business. The pandemic has forced it to rethink its central concept as a “third place” away from work and home where customers can relax. It now plans to accelerate the rollout of its “pickup” store concept, with smaller-format locations that don’t have customer seating. In the U.S., Starbucks is closing about 800 underperforming locations and building new store formats, like urban cafés without seating and more drive-thru lanes in the suburbs. 

Over the long run, the chain is planning to build more than 20,000 additional locations in the next decade to meet its goal of reaching 55,000 locations by fiscal 2030, up from nearly 33,000 today.

“We are well positioned to invest in the right areas to strengthen our competitive advantage and drive consistent, sustainable growth for decades to come,” Chief Executive Officer Kevin Johnson told investors in December.

Bottom Line

Starbucks may not have more upside in the short run after a power run during the past 12 months, but we believe the stock is a good buy-the-dip trade due to its long-term growth potential. 

The company, with an annual dividend yield of 1.63%, pays $0.45 a share quarterly, making it a suitable candidate for income-seeking investors. Its payout has grown about 18% per year during the past three years, highlighting management's strong focus on returning capital to stakeholders.   

Starbucks: Still A Buy After 70% Jump In One Year?
 

Related Articles

Tim Knight
Cannabis Stocks Getting Snuffed Out By Tim Knight - Apr 12, 2021

When it comes to marijuana stocks, I have to be even more careful than normal around these hallways, since some people react badly to my conservative disposition toward the stuff....

Starbucks: Still A Buy After 70% Jump In One Year?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Andrew Avila
Andrew Avila Apr 06, 2021 8:06PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
bro right when I short sbux stock, this goofball has to say this🤦‍♂️
davide patti
davide patti Apr 06, 2021 8:06PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
hahah, this is funny, enjoying life :)
winter reveries
winter reveries Apr 06, 2021 2:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
thanks
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email