8 Apr

Starbucks Stock Fell after UBS Downgrade

WRITTEN BY Rajiv Nanjapla

Stock performance

Starbucks (SBUX) was trading in the red in today’s pre-market hours. The weakness in the broader equity market and the downgrade of the stock by UBS appear to have led to a fall in the company’s stock price.

Starbucks Stock Fell after UBS Downgrade


Year-to-date performance

Starbucks stock has increased by 16.5% since the beginning of 2019. The strong first-quarter performance in fiscal 2019 drove the company’s stock price. For the quarter ended on December 30, the company posted adjusted EPS of $0.68, outperforming analysts’ expectation of $0.65, while its revenue came in at $6.63 billion, beating analysts’ expectation of $6.49 billion. The company’s overall SSSG (same-store sales growth) also beat analysts’ expectations with a strong performance from the Americas segment and the China/Asia-Pacific segment.

In comparison, peers McDonald’s (MCD) and Dunkin’ Brands (DNKN) have returned 7.4% and 17.2%, respectively. The broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests in restaurant and travel companies, has returned 18.7% YTD.

Analysts’ estimates

For fiscal 2019, analysts project Starbucks to post revenue of $26.29 billion, which represents a rise of 6.3% from $24.72 billion in fiscal 2018. During the same period, the company’s EPS are expected to rise by 11.7% to $2.70.

Valuation multiple

The increase in Starbucks’s stock price since the beginning of 2019 has also raised its valuation multiple. As of April 5, the company was trading at a forward PE multiple of 26.2x compared to 23.5x at the beginning of this year. In comparison, McDonald’s and Dunkin’ Brands were trading at a forward PE multiple of 23.0x and 24.7x, on the same day, respectively.

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