Washington-based Starbucks Corporation (SBUX) operates as a roaster, marketer, and retailer of coffee. Valued at a market cap of $123.3 billion, the company offers fresh, rich-brewed coffees along with many complimentary food items and a selection of premium teas and other beverages, sold mainly through the company's retail stores.
Shares of this coffeehouse company have lagged behind the broader market over the past 52 weeks. SBUX has gained 15.8% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 22.6%. Nonetheless, on a six-month basis, the stock is up 44.4%, significantly higher than SPX’s 10.5% return.
Narrowing the focus, Starbucks has underperformed the Consumer Discretionary Select Sector SPDR Fund’s (XLY) 32.6% gain over the past 52 weeks but has outpaced XLY’s 24.4% return over the past six months.
Starbucks released its Q1 earnings results on Jan. 28 and shares of SBUX closed up more than 8% the following day. Its revenues of $9.4 billion and profit of $0.69 per share came ahead of Wall Street’s expectations of $9.3 billion and $0.66 per share, respectively. However, the bottom line decreased 23.3% year-over-year, while the top line remained relatively flat. Global comparable store sales declined by 4%, primarily due to dismal trends in the United States as well as the international market.
Furthermore, its operating margin contracted 390 bps year-over-year, adding to the downtick. However, investors overlooked these negatives because the company proclaimed that it was on track with its turnaround plan and also announced its next dividend payment would be right on schedule and in line with the previous dividend payment.
For the current fiscal year, ending in September, analysts expect SBUX’s EPS to decline 9.4% year over year to $3. The company’s earnings surprise history is mixed. It surpassed or met the consensus estimates in three of the last four quarters while missing on another occasion.
Among the 29 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on 16 “Strong Buy,” two “Moderate Buy,” nine “Hold,” one “Moderate Sell,” and one “Strong Sell” rating.
On Jan. 29, BMO Capital Markets maintained an “Outperform” rating on Starbucks and raised its price target to $115, noting its ongoing turnaround efforts. This indicates a 5.8% potential upside from the current levels.
The Street-high price target of $120 suggests an upside potential of 10.4%. As of writing, SBUX is trading above its mean price target of $105.56.
On the date of publication, Neharika Jain did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.More news from Barchart
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