From Nasdaq:

Starbucks stock (NASDAQ: SBUX), the world’s leading roaster, marketer, and retailer of specialty coffee worldwide, currently trades at $93 per share, around 26% below its level of $126 seen on July 26, 2021. 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. In addition, its earnings per share (EPS) of $3.58 was up 26% y-o-y in FY 2023. Despite its consistent revenue growth.
Despite its consistent revenue growth, the company has not been able to increase its margins in a meaningful way. SBUX’s FY 2023 revenue was 35% higher than FY 2019 levels but its operating margin only increased 900 basis points during this period. 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%.

Returns for the stock were 9% in 2021, -15% in 2022, and -3% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022 and 24% in 2023 – indicating that SBUX underperformed the S&P in 2021 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and HD, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has- outperformed the S&P 500 each year over the same period.

Returning to the pre-inflation shock level means that SBUX will have to gain about 35% from here. While it has the potential to recover to those levels eventually, we estimate SBUX’s Valuation to be around $102 per share, almost 12% higher than the current market price.

SBUX stock and the broader market performed during the 2007/2008 crisis. SBUX stock fell from nearly $13 in October 2007 to almost $5 in March 2009, implying that SBUX stock lost almost 65% of its pre-crisis value. It grew from the 2008 crisis to levels of around $12 in early 2010, rising roughly 152% between March 2009 and January 2010. The S&P 500 saw a decline of 51%, falling from levels of $1,540 in September 2007 to $757 in March 2009. It then rallied 48% between March 2009 and January 2010 to reach levels of $1,124.

SBUX revenues fell from $26.5 billion in 2019 to $23.5 billion in 2020, due to the impact of Covid-19 lockdowns worldwide. However, the company’s revenue grew to about $32.3 billion in FY 2022, striking a healthy balance between rising customer traffic and increased spending during this period. Earnings per share fell to around 79 cents in FY 2020 from $2.95 in FY 2019 before rising back to $2.85 in FY 2022.

With the Fed’s efforts to tame runaway inflation rates helping market sentiment, we believe SBUX stock has the potential for strong gains once fears of a potential recession are allayed. It is helpful to see how its peers stack up. SBUX Peers shows how SBUX stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.



Read more: Down 26% From Its Pre-Inflation Shock High, What Is Next For Starbucks Stock?