It’s time to talk about another iconic brand. Here is the breakdown on $SBUX, otherwise known as Starbucks.
Current Price: $96.81
52/Wk High: $107.75
52/Wk Low: $50.02
Dividend: $0.45 / 1.83% Yield
Market Cap: $114.0 Billion
Read below for the breakdown!
Starbucks is one of the best-known coffee retailers and roasters in the world, with over 32,938 global stores and locations.
Due to COVID-19 Starbucks has taken a major hit as the rest of the retail market, but the company has developed new sales channels such as delivery, digital ordering, and much more to come back stronger throughout the global pandemic.
In recent months, Starbucks stock has recovered significantly, moving 12.78% to the upside, reaching highs of $107.25/share in just the last month. In light of the market’s recent pullback, many are led to wonder whether Starbucks is a buy.
Digging into the numbers, Starbucks recently reported a Q1 2021 beat, with an EPS of $0.61, better than the expected EPS consensus estimate of $0.55. The positivity didn’t stop there, with Starbucks reporting an improving story of recovering from the pandemic.
Starbucks went on to report net revenues of $6.7 billion for Q1, representing a -5% decline due to the pandemic, but better than previous quarters since the COVID-19 pandemics inception.
Taking a look at sales, Starbucks reported Q1 sales down -5% in the US and up 5% in China, both of which continue to recover from the negative effects of the pandemic.
As for memberships, Starbucks reported Active Starbucks Rewards Memberships increased 15% in the US on a year over year basis, totaling 21.8 million members as of Q1 2021.
Digging deeper, the average ticket total increased 20% in the US, which offset the -6% store sale decline in the US. As for Starbucks international segment, the segment store sales were down -3% in Q1 but offset by an increase in average ticket by 8%.
When it comes to one of the most important Starbucks segments, the China segment, store sales increased by 5%, led higher by an increase in average ticket by 9%.
Management also noted new stores continue to be opened, with 278 net new stores opening in the first quarter of 2021, representing 4% year over year unit growth. It is important to note that US and China stores represent 61% of Starbuck’s global portfolio.
On the margin front, management reported a GAAP operating margin of 13.5%, lower than the 17.2% in Q1 of 2020 but improving from the devastating effects of the COVID-19 pandemic.
Starbucks also reported strong guidance for both FY 2021 and Q2 of 2021, updating their FY 2021 expected GAAP EPS expectations to a range of $2.42 up to $2.62.
The rest of FY 2021 looks bright as well, with management expecting the following store sales growth;
Global: 18% to 23% Growth
Americas and US: 17% to 22% Growth
International: 25% to 30% Growth
China: 25% to 32% Growth
When it comes to new locations, Starbucks expects to open 2,150 new stores throughout FY 2021, with 1,100 net new Starbucks stores globally.
As for revenues, Starbucks management believes revenues will total $28.0 to $29.0 billion in 2021, much better than the FY 2020 results.
Rounding out management's expectations, Starbucks expects US store sales to grow 5% to 10% and China store sales to grow a whopping 100% in Q2.
Shifting into the balance sheet, the numbers are solid.
Total Debt: $15.916 Billion
Total Liabilities: $37.878 Billion
Total Assets: $29.968 Billion
Cash & Short Term Inv: $5.264 Billion
On a valuation basis, Starbucks is trading at a lofty premium.
Price to Earnings: 173.97x
Price to Sales: 4.92x
Price to Cash Flow: 28.12x
Management has done a solid job and has been effective.
Return on Assets: 2.29%
Return on Invested Capital: 3.22%
Given the numbers the analysts are bullish with a mean price target of $112.11/share, representing a 15.80% upside.
It is also important to note, that the high price target is $125.00/share, representing a 29.12% upside, while the low price target is $100.00/share, representing a 3.30% upside.
The big money is also quite involved, with 66.43% of Starbucks being owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and State Street Global Advisors.
On a technical front, Starbucks could be presenting an opportunity. According to the six-month charts, the MACD has shifted to the downside with significant momentum within a range of 0.26 down to -0.67.
The six-month charts are also indicating an RSI of 35.52 and CCI of -245.43, both of which are on the low end.
In short, Starbucks continues to be a solid long-term investment, with a bright future, loyal customer base, and when free of the pandemic, significant growth.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.