Starbucks stock has soared more than 40% in the past 12 months, handily outperforming the S&P 500 's 8% gain. But after that big rally, investors might wonder whether it's time to unload some shares. To decide, let's do a basic SWOT (strengths, weaknesses, opportunities, and threats) analysis of Starbucks' business.
Strengths
Starbucks has a solid record of top- and bottom-line growth. From fiscal 2010 to 2014, the java house's annual revenue rose 53% and earnings per share more than doubled. The company expects revenue to rise 16% to 18% this year, compared to 11% top-line growth in 2014. Starbucks recently took full control of Starbucks Japan, which should boost its top line this year with over $1 billion in incremental revenue.
Source: YCharts
If Starbucks thinks coffee prices will rise next year, it signs supply contracts to "lock in" that year's supply at current prices. As of last quarter, Starbucks had locked in nearly 70% of its coffee supply for 2016. But if coffee prices fall below Starbucks' locked-in price, it loses money on that bet.
Another threat is rising competition, notably across the United States and Canada. Starbucks has a healthy presence in the western and central U.S., but Dunkin' Donuts is firmly entrenched across the eastern seaboard, while Tim Hortons has a strong presence along the Canadian border. Dunkin' Donuts plans to challenge Starbucks by opening 200 new stores in California over the next five years, as well as 1,400 stores across China via a joint venture over the next two decades.
The verdict
Starbucks might experience near-term volatility due to soft sales in Europe, a strong dollar, and unstable coffee prices. But I believe the company's impressive ability to consistently grow its revenue, earnings, store count, and comparable sales easily outweighs those weaknesses and threats.
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The article SWOT Analysis of Starbucks Corporation (SBUX) originally appeared on Fool.com.
Leo Sun owns shares of Starbucks. The Motley Fool recommends Keurig Green Mountain and Starbucks. The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
