Why Starbucks Is Trading near Its 52-Week High



Stock performance

Starbucks (SBUX) posted its fiscal 2Q17 earnings on April 27, 2017. The company failed to meet analysts’ global same-store sales growth (or SSSG) and revenue estimates, which led Starbucks stock price to fall 2%. However, since then, the company’s stock has risen 5.4%. On May 26, 2017, Starbucks was trading at $63.3 and closed at a 52-week high of $63.42.

Technological advancements, the introduction of new food and beverage items, and aggressive expansion plans in the CAP (China and Asia-Pacific) region have increased investors’ confidence, leading to a rise in Starbucks stock. In fiscal 2Q17, the company posted an SSSG of 7% in China compared to global SSSG of 3%.

Also, the positive response by customers to its Seattle roastery has prompted the company to start the construction of new roasteries in Shanghai, New York, Milan, Tokyo, and Chicago. Apart from providing exclusivity, roasteries are also critical to sustainable growth over the long term.

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Year-to-date performance

2016 was a transition year for Starbucks as it shifted its loyalty program from frequency-based to spending-based. During the period, the stock fell 7.5%. However, 2017 has started on a good note with its stock rising 14% year-to-date (or YTD). During the same period, Dunkin’ Brands (DNKN), McDonald’s (MCD), and Domino’s Pizza (DPZ) have returned 10.9%, 23.1%, and 30%, respectively.

In comparison, the Consumer Discretionary Select Sector SPDR Fund (XLY) and the S&P 500 Index (SPX) have returned 11.5% and 7.9%, respectively, YTD. XLY invests 10.1% of its holdings in restaurant and travel companies.

Series overview

In this series, we’ll look at analysts’ revenue and earnings estimates for the next four quarters. We’ll wrap this series up by looking at Starbucks’s valuation multiple and analysts’ recommendations.

Let’s start by looking at revenue estimates.


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