Stock (Symbol) |
Starbucks (SBUX) |
Stock Price |
$61 |
Sector |
| Retail & Travel |
Data is as of |
| January 18, 2018 |
Expected to Report |
| Jan 25 |
Company Description |
 Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 65 countries. It purchases and roasts high-quality coffees, along with handcrafted coffee, tea and other beverages and fresh food items, through company-operated stores. The Company sells goods and services under the brands including Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, La Boulange and Ethos. SBUX has four operating segments: Americas, which is inclusive of the US, Canada, and Latin America; Europe, Middle East, and Africa (EMEA); China/Asia Pacific (CAP) and Channel Development. Source: Thomson Financial |
Sharek’s Take |
 Starbucks’ (SBUX) has been moving sideways since the Summer of 2015, the stock still doesn’t like it will break out anytime soon. SBUX has a case of deteriorating fundamentals, as profit growth has gone from around 17%-20% to around 12% during that time. The P/E used to be 33, and that’s high when profits grow 12%. Thus the P/E has been reduced. And when profits grow while the P/E declined the stock goes sideways. Still, this is a good investment. The company’s Mobile Order and Pay has boosted sales, and China will lead the next phase of growth. The high-end Roasteries and Starbucks Reserve stores gives the company growth opportunity. Starbucks can also boost sales per store by offering new lunch items. The company now has greater than 2000 location in China, and management plans to open 500 more locations in that country per year for the next five years, with the country eventually becoming its largest market. Analysts have an Estimated Long-Term Growth Rate of 14% on SBUX now, which is down 1% since last qtr. And I feel this could get lowered in the coming qtrs to around 12%. The stock has a high degree of safety, and a yield of close to 2%. This is a fine buy-and-hold stock for conservative and moderate growth investors, but I envision the stock being around this price for the next six months. |
One Year Chart |
 Last qtr’s profits took a tumble due to “choppiness” and closure charges for closing 379 Teavana mall stores. That’s OK, and shouldn’t hurt the stock because those stores weren’t good for the company anyways. Annual estimates stayed the same this qtr. Qtrly Estimates are for growth of 10%, 13%, 16% and 18% the next 4 qtrs. The P/E of 26 is fair for this stock. |
Fair Value |
 My Fair Value is a P/E of 25 due to the quality of this company. The qtrly reports are remarkable, as management is on the cutting-edge with technological advances in restaurant management. Still, the stock’s fairly valued here. |
Bottom Line |
 Starbucks has been basing for a while now, but with slowing profit growth and a P/E that’s double the profit growth rate, I imagine the stock will continue on this sideways pattern. Still, there’s expansion opportunities in China as well as the ability to get more products out of each store by improving lunch and dinner options. SBUX ranks 16th in the Conservative Portfolio Power Rankings. The stock ranks last in the Growth Portfolio Power Rankings and I may sell the position soon as the growth is getting a little slow. |
Power Rankings |
Growth Stock Portfolio
39 of 39Aggressive Growth Portfolio N/AConservative Stock Portfolio 16 of 32 |
