One of the most famous coffee brands in the world appears to be ushering in a new era in its history. Simultaneously, the latest Starbucks report garnered mainly positive feedback from analysts. So, do these shares present a compelling investment opportunity right now? Or is everything more intricate than it seems?
First, let's take a look at the trajectory of Starbucks stock in the last 12 months. The chart below demonstrates an 18% growth, which could lend a more positive outlook to your portfolio's performance. Also, if you want to find more shares with robust returns, you may find value in using stock screener. This tool provides a list of assets aligned with your filters and criteria.
Starbucks stock has achieved even more impressive results over the past five years, significantly surpassing the average market growth. Its performance has notably outpaced the S&P 500, registering a 97% gain compared to the latter's 59%.
The vital catalyst behind the changes in Starbucks' business strategy was the Covid pandemic (yes, we all were a bit of Starbucks back then). This marked a moment when trends took a turn, and people started to work at home more frequently. Spending time in chain coffee shops with a cup having a trendy logo became more appealing than engaging in the same ritual at the office. However, the choice between the comforts of home and Starbucks allure is less obvious.
Therefore, Starbucks is recalibrating its approach. The company bets on digitalization, which enables customers to swiftly grab coffee, order deliveries, and participate in a loyalty program. Additionally, the company is expanding its footprint in smaller cities. This move is connected with the surge in remote work, as some customers opt for locales removed from metropolises.
Also, Starbucks is upgrading its equipment in coffee shops – it provides an opportunity to offer superior-quality coffee and diversify the menu with new selections like trendy iced beverages and plant-based options.
What about the latest financial report? It revealed mixed results for fiscal Q3 2022 but mostly positive ones. Earnings per share (EPS) exceeded expectations, totaling $1 compared to the projected $0.95. The revenue was higher than Q3 2021 by 12%; however, it fell slightly short of estimates. Overall, sales are growing. And also, the Chinese economy's recovery, regardless of its pace, might become a driver for their future increase.
These factors collectively embolden analysts to set optimistic targets for Starbucks stock. The consensus forecast anticipates a 12% surge over the next 12 months, carrying a "Buy" rating.
However, if the idea of immediately acquiring additional Starbucks shares crosses your mind, please stop – it's a bad one. It's better to start with a cup of coffee instead. And after that, you can conduct your own analysis, hereby facilitating an informed decision-making process.
