We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Starbucks (SBUX) Stock Sunk Wednesday: Should You Stay Away?
Read MoreHide Full Article
Starbucks (SBUX - Free Report) saw its stock price sink roughly 2% through midday trading Wednesday after Piper Jaffray lowered its rating for the coffee powerhouse. Clearly, this news worried some investors, but should you stay away from Starbucks stock at the moment?
Downgrade
Piper Jaffray lowered its rating for SBUX from "overweight" to "neutral" following Tuesday’s close. The firm based much of this downgrade on a lack of confidence that Starbucks can grow in its greatly important domestic market. "We believe the stock is range bound at best until U.S. trends improve," analyst Nicole Regan wrote in a note to clients. "Our perspective is that there are issues around inconsistent results, credibility of guidance, and management transitions."
The firm also lowered its price target for Starbucks from $60 per share to $53 per share, which was $1 below Tuesday’s closing price of $54 per share. Piper Jaffray and Regan noted that their concerns about Starbucks are not new, but they just don’t see the stock doing much within “a reasonable timeframe."
Other Worries
In its most recently reported quarter, Starbucks saw its global comparable store sales jump just 1%. What’s worse, the company’s comps were driven by a 3% jump in the average ticket and not more overall transactions. Diving deeper, SBUX’s U.S. same-store sales were up only 1%. Meanwhile, Starbucks’ comparable store sales sunk by 2% in China. The bad part here is that Starbucks is actively trying to expand in the world’s second-largest economy.
However, Piper Jaffray analysts did point to potential long-term growth in China as a positive, while also looking to Starbucks’ newer roastery and reserve bar locations as reasons to be more optimistic down the road.
The Good?
Starbucks announced in early August a new partnership with Chinese e-commerce giant and Amazon (AMZN - Free Report) rival Alibaba (BABA - Free Report) to help boost its sales and standing in the country. Plus, the firm has plans to add 600 new stores per year in Mainland China through 2022 in order to double its locations to 6,000 total stores in 230 cities.
The company’s net revenues in its China/Asia Pacific segment soared by 46% to touch $1.23 billion in fiscal Q3, which was driven by incremental revenues from 746 net new store openings over the last year.
Starbucks also saw its overall net revenues surge 11% to hit $6.3 billion. Something that investors should also pay close attention to is the coffee chain’s mobile order and pay business, which accounted for 13% of U.S. company-operated transactions last quarter. Plus, the firm is still a money making power, having returned $1.3 billion to shareholders through a combination of share repurchases and dividends.
Bottom Line
Starbucks’ days of massive growth are likely over for good. But the firm has made plans to expand in China and improve its mobile business, while also adding new high-end store concepts as it tries to fight off not only Dunkin' Donuts and McDonald's (MCD - Free Report) but a growing number of smaller brands slowly grabbing more market share.
Starbucks is projected to see its full-year revenues surge by 10.4% to hit $24.72 billion, based on our current Zacks Consensus Estimate. Moving onto the other end of the income statement, SBUX’s full-year EPS figure is expected to expand by nearly 17% to reach $2.41 per share.
However, the company has received mixed earnings estimate revision activity recently, which helps it earn its Zacks Rank #3 (Hold). And Starbucks stock has done practically nothing over the last three years, up just around 5%—before Wednesday’s dip. Therefore, investors might want to just keep an eye on SBUX until it can figure out how to drive better comps growth in the U.S. and China.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Starbucks (SBUX) Stock Sunk Wednesday: Should You Stay Away?
Starbucks (SBUX - Free Report) saw its stock price sink roughly 2% through midday trading Wednesday after Piper Jaffray lowered its rating for the coffee powerhouse. Clearly, this news worried some investors, but should you stay away from Starbucks stock at the moment?
Downgrade
Piper Jaffray lowered its rating for SBUX from "overweight" to "neutral" following Tuesday’s close. The firm based much of this downgrade on a lack of confidence that Starbucks can grow in its greatly important domestic market. "We believe the stock is range bound at best until U.S. trends improve," analyst Nicole Regan wrote in a note to clients. "Our perspective is that there are issues around inconsistent results, credibility of guidance, and management transitions."
The firm also lowered its price target for Starbucks from $60 per share to $53 per share, which was $1 below Tuesday’s closing price of $54 per share. Piper Jaffray and Regan noted that their concerns about Starbucks are not new, but they just don’t see the stock doing much within “a reasonable timeframe."
Other Worries
In its most recently reported quarter, Starbucks saw its global comparable store sales jump just 1%. What’s worse, the company’s comps were driven by a 3% jump in the average ticket and not more overall transactions. Diving deeper, SBUX’s U.S. same-store sales were up only 1%. Meanwhile, Starbucks’ comparable store sales sunk by 2% in China. The bad part here is that Starbucks is actively trying to expand in the world’s second-largest economy.
However, Piper Jaffray analysts did point to potential long-term growth in China as a positive, while also looking to Starbucks’ newer roastery and reserve bar locations as reasons to be more optimistic down the road.
The Good?
Starbucks announced in early August a new partnership with Chinese e-commerce giant and Amazon (AMZN - Free Report) rival Alibaba (BABA - Free Report) to help boost its sales and standing in the country. Plus, the firm has plans to add 600 new stores per year in Mainland China through 2022 in order to double its locations to 6,000 total stores in 230 cities.
The company’s net revenues in its China/Asia Pacific segment soared by 46% to touch $1.23 billion in fiscal Q3, which was driven by incremental revenues from 746 net new store openings over the last year.
Starbucks also saw its overall net revenues surge 11% to hit $6.3 billion. Something that investors should also pay close attention to is the coffee chain’s mobile order and pay business, which accounted for 13% of U.S. company-operated transactions last quarter. Plus, the firm is still a money making power, having returned $1.3 billion to shareholders through a combination of share repurchases and dividends.
Bottom Line
Starbucks’ days of massive growth are likely over for good. But the firm has made plans to expand in China and improve its mobile business, while also adding new high-end store concepts as it tries to fight off not only Dunkin' Donuts and McDonald's (MCD - Free Report) but a growing number of smaller brands slowly grabbing more market share.
Starbucks is projected to see its full-year revenues surge by 10.4% to hit $24.72 billion, based on our current Zacks Consensus Estimate. Moving onto the other end of the income statement, SBUX’s full-year EPS figure is expected to expand by nearly 17% to reach $2.41 per share.
However, the company has received mixed earnings estimate revision activity recently, which helps it earn its Zacks Rank #3 (Hold). And Starbucks stock has done practically nothing over the last three years, up just around 5%—before Wednesday’s dip. Therefore, investors might want to just keep an eye on SBUX until it can figure out how to drive better comps growth in the U.S. and China.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>