Starbucks: Historically Cheap But Shares Appear Fairly Valued At Best

Summary:

  • Starbucks’ premium brand image and pricing power face challenges as consumer spending slows, impacting earnings and comparable store sales.
  • Q3 FY24 results show a 0.6% YoY revenue decline and a 4.2% drop in operating income, highlighting economic pressures on consumer spending.
  • Despite opening 526 new stores, revenue growth remains weak, and the stock appears fairly valued with significant growth expectations already priced in.
  • I am uncertain the firm can achieve 7-10% EPS growth amid economic headwinds and consumer spending constraints.
  • Rating downgrade from “Buy” to “Hold”.
Starbucks coffee sign hanging outside a shop

JohnFScott

Investment Thesis

Starbucks (NASDAQ:SBUX) is the world’s leasing quick-serve coffee chain. The company has curated a premium brand image that has proven highly effective at resonating with consumers across the globe.

As a result, Starbucks continues to enjoy a significant pricing


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