Starbucks Corporation Analysis
Chart done on daily timeframe. Starbucks shares cratered last week after the company missed their quarterly earnings expectations, citing a drop in same store sales. Quarterly revenue declined about 1.84% along with net income by 15%, a big blow to the company’s bottom line; however if we zoom out and look at their performance over the last two years, we’ll find that Starbucks actually posted their best years to date in 2022 and 2023. Last year’s revenue reflected 12% YoY growth to $36B, but their numbers still didn’t impress investors enough to hold on to the stock. Starbucks topped out around May of last year and has been selling since, leading up to the 15% earnings drop we saw to start off May.
Where does it go from here?
It’s safe to say that Starbucks isn’t going anywhere in the short term, but in a time when consumer are extremely conscious about where they spend their dollars, it becomes harder for Starbucks to maintain growth. There comes a time in every company’s life when its investors realize that it has reached about the “maximum” level of growth and it will now just bring in predictable, but flat revenue for a period. Technology companies often adapt and introduce new ways of revenue, but Starbucks can only do so much. The company has trialed hundreds of different items, but none will be a massive revenue generator so they have to rely on their customer loyalty and flagship products, which often slow in sales depending on consumer spending.
Starbucks now trades at a price to earnings ratio of 20, right at the center of the healthy 15-25 range, but we expect a further correction towards 15 before recovery. The company is a buy, but expect a slow turnaround. Targets to add are 68.00 and 61.00.