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Starbucks (SBUX)
NASDAQ:SBUX
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Starbucks
(NASDAQ:SBUX)67Neutral
Positive Factors
International Performance
Starbucks is seeing better-than-expected international trends, with significant efficiency gains realized.
Leadership
New leadership at Starbucks is showing positive results with improved performance metrics in the first quarter.
Negative Factors
Valuation
The stock's current valuation already embeds much of the expected long-term recovery upside, questioning the justification of a high price-to-earnings ratio.
Starbucks (SBUX) vs. S&P 500 (SPY)
Market Cap
$119.80B
Dividend Yield2.24%
Average Volume (3M)11.58M
Price to Earnings (P/E)34.1
Beta (1Y)1.09
Revenue Growth-1.48%
EPS Growth-17.32%
CountryUS
Employees361,000
SectorConsumer Cyclical
Sector Strength53
IndustryRestaurants & Bars
Share Statistics
EPS (TTM)3.09
Shares Outstanding1,135,900,000
10 Day Avg. Volume11,363,187
30 Day Avg. Volume11,584,927
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)3.31
Price to Cash Flow (P/CF)14.50
P/FCF Ratio13.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$111.19Price Target Upside4.42% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering23
Starbucks Business Overview & Revenue Model
Company DescriptionStarbucks Corporation, established in 1971 and headquartered in Seattle, Washington, operates as a premier roaster, marketer, and retailer of specialty coffee worldwide. The company operates in multiple sectors, primarily through its retail stores, but also includes licensed stores, consumer packaged goods, and foodservice. Its core products include coffee beverages, handcrafted drinks, merchandise, and fresh food items, alongside a variety of premium teas and other beverages under its diverse brand portfolio.
How the Company Makes MoneyStarbucks makes money predominantly through the sale of beverages and food items in its company-operated stores, which account for a significant portion of its revenue. The company also generates revenue through licensed stores, where it receives a percentage of sales as royalty fees, and sells coffee products and other branded items through retail channels and foodservice accounts. Additionally, partnerships with other companies, like Nestlé for the global distribution of Starbucks branded products, contribute to its earnings by expanding its reach in the consumer packaged goods sector. Starbucks' loyalty program, Starbucks Rewards, also plays a crucial role in driving repeat business and customer engagement, further enhancing its revenue potential.
Starbucks Financial Statement Overview
Summary
Starbucks exhibits strong income statement performance with growing revenue and margins, indicating operational efficiency and market strength. However, the balance sheet reveals financial instability due to negative equity, presenting a risk factor. The cash flow statement is healthy, showcasing strong cash generation capabilities, which partly offsets balance sheet concerns. Overall, Starbucks is performing well operationally, but financial leverage poses a risk that needs careful management.Income Statement
Starbucks shows a strong financial performance with a consistent increase in revenue and profitability over the years. The Gross Profit Margin and Net Profit Margin are robust, demonstrating effective cost management and profitability. The EBIT and EBITDA margins are healthy, indicating a good operational performance, while the Revenue Growth Rate has been positive, reflecting strong demand and market presence.85
Very Positive
Balance Sheet
The company's balance sheet reflects high leverage with a negative stockholders' equity, indicating financial instability. The Debt-to-Equity Ratio cannot be calculated due to negative equity, and the equity ratio is negative, suggesting more liabilities than assets. However, the Return on Equity is high due to negative equity, but this is not a favorable sign.60
Neutral
Cash Flow
Starbucks demonstrates strong cash flow metrics with positive Free Cash Flow and Operating Cash Flow. The Free Cash Flow Growth Rate is positive, showing efficient cash generation. The Operating Cash Flow to Net Income and Free Cash Flow to Net Income ratios are favorable, indicating efficient cash management and conversion of revenue into cash.75
Positive
| Breakdown | |||||
| TTM | Sep 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Sep 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 36.15B | 36.18B | 35.98B | 32.25B | 29.06B | 23.52B | Gross Profit |
| 9.42B | 9.71B | 9.85B | 8.37B | 8.39B | 5.06B | EBIT |
| 5.04B | 5.41B | 5.87B | 4.62B | 4.87B | 1.56B | EBITDA |
| 6.80B | 7.12B | 7.40B | 6.24B | 7.35B | 3.10B | Net Income Common Stockholders |
| 3.52B | 3.76B | 4.12B | 3.28B | 4.20B | 928.30M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 3.96B | 3.54B | 3.95B | 3.18B | 6.62B | 4.63B | Total Assets |
| 31.89B | 31.34B | 29.45B | 27.98B | 31.39B | 29.37B | Total Debt |
| 25.87B | 25.80B | 24.60B | 23.80B | 23.61B | 25.26B | Net Debt |
| 22.20B | 22.52B | 21.05B | 20.99B | 17.15B | 20.91B | Total Liabilities |
| 39.36B | 38.78B | 37.43B | 36.68B | 36.71B | 37.17B | Stockholders Equity |
| -7.47B | -7.45B | -7.99B | -8.71B | -5.32B | -7.81B |
| Cash Flow | Free Cash Flow | ||||
| 2.91B | 3.32B | 3.68B | 2.56B | 4.52B | 114.20M | Operating Cash Flow |
| 5.78B | 6.10B | 6.01B | 4.40B | 5.99B | 1.60B | Investing Cash Flow |
| -2.99B | -2.70B | -2.27B | -2.15B | -319.50M | -1.71B | Financing Cash Flow |
| -2.06B | -3.72B | -2.99B | -5.64B | -3.65B | 1.71B |
Starbucks Technical Analysis
Positive
106.48
Price Trends
103.12
Positive
99.95
Positive
91.80
Positive
Market Momentum
1.44
Positive
42.74
Neutral
15.54
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SBUX, the sentiment is Positive. The current price of 106.48 is below the 20-day moving average (MA) of 112.15, above the 50-day MA of 103.12, and above the 200-day MA of 91.80, indicating a neutral trend. The MACD of 1.44 indicates Positive momentum. The RSI at 42.74 is Neutral, neither overbought nor oversold. The STOCH value of 15.54 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SBUX.
Starbucks Risk Analysis
Starbucks disclosed 30 risk factors in its most recent earnings report. Starbucks reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Starbucks Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $69.76B | 45.09 | 45.67% | ― | 14.61% | 25.68% | |
76 Outperform | $221.75B | 27.25 | -216.57% | 2.18% | 1.67% | -1.61% | |
75 Outperform | $44.45B | 30.54 | -19.43% | 1.71% | 6.68% | -7.09% | |
72 Outperform | C$42.81B | 21.76 | 32.83% | 3.57% | 21.63% | -14.75% | |
67 Neutral | $119.80B | 34.08 | -47.07% | 2.24% | -1.48% | -17.32% | |
66 Neutral | $3.04B | 16.04 | 68.30% | 6.60% | 2.98% | -2.58% | |
60 Neutral | $13.01B | 10.45 | 0.79% | 3.53% | 1.60% | -22.47% |
* Consumer Cyclical Sector Average
Performance Comparison
SBUX
Starbucks
106.48
16.70
18.60%
CMG
Chipotle
50.23
-3.02
-5.67%
MCD
McDonald's
321.29
33.47
11.63%
WEN
Wendy's
15.53
-1.86
-10.70%
YUM
Yum! Brands
162.53
25.15
18.31%
TSE:QSR
Restaurant Brnd International
95.60
-9.22
-8.80%
Starbucks Earnings Call Summary
Earnings Call Date: Jan 28, 2025 | % Change Since: 6.62% | Next Earnings Date: May 6, 2025
Earnings Call Sentiment Neutral
The earnings call reflected a transitional phase for Starbucks, with early positive responses to strategic shifts like the 'Back to Starbucks' initiative and marketing changes. However, significant challenges remain, such as declining comparable store sales, margin contraction, and flat revenue growth. The company is focused on operational improvements and expansion opportunities to drive future growth.Highlights
Successful Strategy Shift
Starbucks' 'Back to Starbucks' strategy has driven early progress, including gradual top-line improvement, increasing confidence in the company's focus on the right priorities.
Increase in Non-Starbucks Rewards Traffic
Non-Starbucks Rewards customer traffic grew quarter-over-quarter, indicating a positive response to the new marketing strategies.
Menu Simplification and Innovation
Starbucks plans to reduce its menu by approximately 30% by the end of fiscal year 2025, focusing on fewer, better beverage and food offerings.
Expansion Potential in the US
Starbucks sees the potential to double its store count in the US, leveraging smaller formats and diverse store types for better market penetration.
Increased Marketing Investment
Marketing as a percentage of revenue is close to doubling, reallocating budget from discounts to brand advertising, enhancing brand recognition and customer reach.
Improved Morning Daypart Sales
Sales in the morning daypart showed improvement, driven by strategic marketing shifts and operational enhancements.
Lowlights
Decline in Global Comparable Store Sales
Global comparable store sales declined by 4%, driven by a 4% decline in the US, indicating challenges in maintaining sales momentum.
Operating Margin Contraction
The consolidated operating margin contracted by 380 basis points to 11.9%, due to deleverage and investments in the 'Back to Starbucks' strategy.
Revenue Growth Challenges
Total company revenue remained flat at $9.4 billion, despite a 7% net new company-operated store growth, indicating difficulty in driving top-line growth.
Earnings Per Share Decline
Earnings per share (EPS) declined by 22% to $0.69, reflecting the impact of deleverage and increased investments.
Impact of Labor and Benefit Investments
Investments in additional coverage hours, wages, and benefits resulted in a 180 basis point margin pressure in the North America segment.
Company Guidance
During the first quarter of fiscal year 2025, Starbucks reported a total company revenue of $9.4 billion, a global operating margin of 11.9%, and earnings per share (EPS) of $0.69. The company's global comparable store sales declined by 4%, driven primarily by a similar 4% decline in the U.S. market. Despite these figures, Starbucks made strategic investments in labor, marketing, and technology as part of its "Back to Starbucks" initiative, aimed at restoring brand confidence and achieving long-term growth. The company reduced discounted transactions by 40% year-over-year, removed extra charges for non-dairy milk customizations, and launched a new marketing campaign to broaden customer reach. Additionally, Starbucks introduced measures to enhance partner experience, such as increased paid parental leave and a commitment to promote internally. Looking ahead, Starbucks plans to optimize its menu by reducing beverages and food SKUs by approximately 30% and is piloting new technology to improve order sequencing, all while exploring opportunities for significant store count expansion in the U.S.Starbucks Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Starbucks Appoints Cathy Smith as New CFO
Neutral
Mar 4, 2025
On March 4, 2025, Starbucks announced the appointment of Cathy R. Smith as the new executive vice president and chief financial officer, succeeding Rachel Ruggeri, who will be leaving the company. Cathy Smith, with extensive experience in retail and global operations from her previous roles at Nordstrom, Target, and Walmart International, is expected to contribute significantly to Starbucks’ strategic initiatives, including the ‘Back to Starbucks’ plan. Her compensation package includes a base salary, cash incentives, and equity awards to align her with the company’s long-term goals.
Business Operations and Strategy
Starbucks Launches Next Phase of Transformation Initiative
Neutral
Jan 17, 2025
On January 17, 2025, Starbucks announced the next phase of its ‘Back to Starbucks’ initiative aimed at transforming its global support organization. The company has already undertaken several measures to enhance customer experience and operational efficiency, such as improving in-store services and internal leadership opportunities. The upcoming changes will involve restructuring support teams to increase accountability, streamline operations, and reduce complexity, potentially leading to job eliminations. These adjustments are intended to better align support operations with the company’s strategic goals without affecting in-store teams or investments.
Executive/Board ChangesShareholder Meetings
Mellody Hobson to Exit Starbucks Leadership Role
Neutral
Jan 16, 2025
On January 14, 2025, Mellody Hobson announced she would not seek reelection at Starbucks’ 2025 Annual Meeting of Shareholders, having served nearly 20 years in various leadership roles. Her decision is based on confidence in the current leadership and board composition to continue driving the company’s success, highlighting the valuable experiences and insights gained during her tenure.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.