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Starbucks Recovery Continues to Stir

Stock MarketsOct 10, 2021 02:00PM ET
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© Reuters. Starbucks Recovery Continues to Stir

Seattle-based company Starbucks (NASDAQ:SBUX) became a 1990s coffee giant with a historic rise. However, due to the recent COVID crisis, it saw an 11% fall in revenue in 2020. 

Now, as the economy recovers, SBUX stock has seen impressive momentum. This stock has continued to recover this year, showing impressive stability at a time when many other stocks are swinging wildly.

The reasons for this are obvious. The famous international coffee retailer has reopened almost all of its stores. However, Starbucks isn't out of the woods quite yet with respect to the pandemic. There's more that growth analysts and investors expect on the horizon. That said, Starbucks sales are soaring to levels above those prior to the global outbreak. 

As consumers gravitate toward their favorite brands, Starbucks stands to benefit from an elongated reopening thesis. Let's dive into why I'm bullish on this stock, and why investors might want to become more bullish on Starbucks right now. (See Starbucks stock charts on TipRanks)

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The Pandemic Can’t Touch Coffee!

One thing we've all seen on full display is how robust this company has been throughout the pandemic. Indeed, folks like to be caffeinated, whether a pandemic is underway or not.

This reality has been reflected in Starbucks' recent earnings results. In the company's most recent fiscal quarter, Starbucks saw revenue hit $7.5 billion. While that's an impressive number in absolute terms, this also represented a 78% year-over-year increase.

According to the company, customer mobility is one factor boosting sales. As the economy reopens, it's expected that this growth could actually pick up from here. We're all longing for human reconnection. Indeed, Starbucks' business model provides the "third place," or a place to rest other than work or home, for which consumers are looking.

Of course, concerns remain regarding how robust this recovery will be. Variants have continued to cause rising case loads in many parts of the country. Additionally, many workers are still working from home and foregoing their usual cup of Joe on the way to work. These factors continue to depress sales from where they otherwise may be.

That said, drive-thru, mobile ordering, and to-go orders remain strong. These are expected to offset in-restaraunt dining revenues that may otherwise wane.

All Down to Statistics

Of course, the pandemic has affected all businesses, and Starbucks is no exception. In September 2020, the company reported an earnings beat with an EPS of $0.79. Moreover, Starbucks reported cashflow of $1.6 billion from operating activities. However, the company's total revenue fell to $23.5 billion.

As the economy recovers, experts believe that Starbucks' revenues will increase by 21% and reach $28.5 billion for FY2021. Additionally, Starbucks' EPS figure is expected to be at $3.17. Experts also believe that the company's net income will expectedly reach $3.7 billion in 2021. These factors appear to be bullish for SBUX stock to continue its slow-and-steady recovery. 

What Are Analysts Saying About SBUX Stock?

As per TipRanks’ analyst rating consensus, SBUX is a Moderate Buy. Out of 18 analyst ratings, there are 12 Buy recommendations and 6 Hold recommendations. 

This stock has an average Starbucks price target of $130.33, implying an upside of 17.18%. Analyst price targets range from a high of $145 per share to a low of $105 per share. 

Bottom Line

Starbucks is a global brand with a strong presence. The company's position in the global coffee market, which is expected to grow to over $465 billion by 2026, is worth noting.

As when investing in any sector, picking the dominant company with the strongest brand is a strategy that has tended to work out for investors over the long-term. Accordingly, Starbucks is an intriguing stock to consider right now.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

Starbucks Recovery Continues to Stir

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Kevin Avila
Kevin Avila Oct 10, 2021 7:56PM ET
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It’s going to be rough for Starbucks for the next couple of years as the recession begins and people keep their extra money and make coffee at home…
ZS Beck
ZS Beck Oct 10, 2021 7:41PM ET
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9$ for a coffee and Croissant 🥐 . They lost they mind.
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