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Starbucks Hits 52-Week High after Credit Suisse’s ‘Outperform’

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Stock performance

After Credit Suisse’s “outperform” rating on June 25, Starbucks (SBUX) stock rose to its 52-week high of $85.19 before closing the day at $84.25, implying a rise of 0.7% from its previous day’s closing price. YTD (year-to-date), Starbucks has returned 30.8%, outperforming the broader equity market, while the S&P 500 Index has risen 16.4% during the same period. Its peers McDonald’s (MCD) and Dunkin’ Brands (DNKN) have returned 15.8% and 24.7%, respectively, YTD.

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Investor optimism about Starbucks’s strategy to accelerate its cold beverage innovations and expand its delivery service, along with its strong performances in the first and second quarters of fiscal 2019, has contributed to the rise in its stock price. You can read more about Starbucks’s second-quarter performance in Starbucks Raised Its Guidance after Its Earnings Beat.

Valuation multiple

With Starbucks’s stock price rising 30.8% since the beginning of this year, its valuation multiple has also increased. On June 25, the company was trading at a forward PE multiple of 28.1x compared to 23.5x at the beginning of 2019. In comparison, its peers McDonald’s and Dunkin’ Brands were trading at forward PE multiples of 24.7x and 25.8x, respectively, on June 25. The company’s strong SSSG (same-store sales growth) and aggressive expansion strategy have allowed it to trade at a higher PE multiple than its peers.

Starbucks is trading at 30.3 times analysts’ fiscal 2019 EPS estimate of $2.78 and 27.3 times analysts’ fiscal 2020 EPS estimate of $3.09, with its EPS expected to rise 14.9% in fiscal 2019 and 27.3% in fiscal 2020.

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