Investors raising SBUX stock
Business and revenues should grow in the future but price of the stock is expensive
Starbucks is one of the most recognized brands in the world. To the consumers, Starbucks is much more than just a coffee shop. Starbucks aims to open around 12,000 new stores globally by 2021, including 2500 stores in China. The company's global expansion has led to tremendous growth in the past, especially in emerging markets, while 75% of Starbucks' revenue are still coming from the U.S (revenue for fiscal 2016 was $21 billion, an increase of 11% compared to 2015). Starbucks' expansion into international markets, especially China, will be the main driver of growth going forward. In the long run according to some analysts, China is expected to eventually be a bigger market than the U.S.
Starbucks is building its own cloud-based platform called "digital flywheel," to integrate mobile payments and loyalty programs. Starbucks aims to have 80% of worldwide stores on this unified platform by the end of fiscal 2019. The company developed app which has more than 10 million downloads, customers can order coffee for pickup in store closest to them. Starbucks has also been one of the best dividend-growth stocks (current yield of 1.6% is not too big but stockholders are constantly rewarded from stock buybacks and steady dividends).
The fundamentals of the company are not bad :Starbucks currently has a P/E ratio of 29x last year's earnings, total debt is acceptable, revenue for fiscal 2016 was $21 billion (an increase of 11% compared to 2015), net income in 2016 was 2.8 billion USD, in 2016 company paid 1.17 billion USD dividend to its shareholders.. but with 81.5 billion USD market capitalization this company/stock is too expensive.
When we look at two year chart (period of 2 years) we can see that price of SBUX stock is moving in "sideways" ( we can also notice chart pattern "bullish pennant"). Below we can see support and resistance levels (current trading range). If the price breaks this support it would be a very strong "SELL" signal and we have a open way to $45. If the price jumps above this resistance level that would be a confirmation of "BULLISH" trend and open way to $63.
The company's global expansion has led to tremendous growth in the past, especially in emerging markets, while 75% of Starbucks' revenue is still coming from the U.S. Starbucks' expansion into international markets, especially China, will be the main driver of growth going forward. SBUX expects its earnings per share and revenues to increase for the upcoming year. The fundamentals of the company are not bad but with 81.5 billion USD market capitalization this company/stock is too expensive. The downside here that there is an increase in the number of investors who are betting on the bearish trend for the stock, this is also my opinion and I would not recommend to invest in this stock currently ( even as short term trader). If the price falls, every price in a range from 35 USD - 40 USD is a very good opportunity to invest in SBUX.
Summary (from latest annual report – 2016)
- Total equity : 5.88 billion USD
- Market Cap is 81.5 billion USD ( last price of the stock is 55.89 USD)
- Starbucks Corporation is an American coffee company and coffeehouse chain. Starbucks was founded in Seattle, Washington in 1971. Today it operates in more than 23,500 locations worldwide (in 68 countries)
- Equity of total company increased from 5.27 billion USD in 2014 to 5.88 billion in 2017
- Company has 2.12 billion USD in cash on account (from latest annual report 2016 year)
- SBUX balance sheet has become stronger in 2017 (In latest annual report - total equity increased to 5.88 billion USD from 5.27 billion USD in 2014, total debt is 3.6 billion USD in 2017)
- Company's revenue increased in 2016 to 21.31 billion USD from 16.44 billion in 2014
- Net income in 2016 was 2.8 billion USD, Net income in 2014 was 2.06 billion USD
- In 2016 company paid 1.17 billion USD dividend to its shareholders