Is Starbucks’ Stock Still On The Rise?

(CTN News) – Starbucks stock has grown by 31% over the last six months, and at its current price of around $107 per share, we believe it is appropriately priced.

In the last six months, SBUX stock rose from $82 to $107, outperforming broader indices, while the S&P Index remained flat.

The name recognition of Starbucks is clearly an advantage. Due to its strong digital sales, the company recovered quickly from its pandemic setback.

Starbucks is well positioned in the coffee business as it enables repeat purchases, which makes it lucrative. The company’s stock is expected to stay at current levels for the foreseeable future.

In spite of an 11% increase in revenue year-over-year (Y-O-Y), Starbucks saw lower earnings. In FY’22, operating margins were 14.3% down from 16.8% in FY’21 due to higher labor and commodity costs.

As a result, its GAAP earnings per share declined by 20% year over year. As a result of ongoing pandemic restrictions in the country, where has more than 6,000 locations, Starbucks transactions fell by a staggering 22% year-over-year in FY’22.

In spite of this, the restaurant chain has experienced strong growth in its core U.S. market, which has helped to offset declines caused by Covid in China.

Starbucks continues its relentless global expansion. In the fourth quarter of 2022, the company opened 763 new stores, bringing its global store count to over 35,700. By 2030, the company anticipates having 55,000 locations worldwide.

Is the brand able to continue to grow since it is already ubiquitous? There is a possibility that the company’s management is overly optimistic about its long-term expansion prospects.

For fiscal year 2023, Starbucks’ revenues are expected to be $36.1 billion, up 12% from last year. We now forecast earnings per share to come in at $3.45. Based on these changes, we have revised our Starbucks valuation to $103 per share. This would be in line with the current market valuation.

Starbucks anticipates 9% growth in U.S. comparable sales in 2023. As China eases its COVID restrictions, it anticipates a rebound in sales.

Furthermore, Starbucks plans to increase its global store count by approximately 7% as a result of growth in its international markets.

As a whole, the company expects revenue to rise by 10% to 12% in FY 2023, despite expected foreign exchange losses of three percentage points.

By FY 2023, the company expects earnings per share to increase by 15% to 20% due to sales growth and margin expansion.

Comparing its performance with its peers is helpful. Take a look at how Starbucks’ peers perform on the metrics that matter. Peer comparisons also provide useful comparisons across industries.

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