Starbucks Faces Challenges Despite Strong Market Position
Starbucks Corporation (SBUX), with a market cap of $116.2 billion, remains a dominant player in the coffeehouse sector. The Seattle-based company excels in premium coffee and food items, aiming to offer top-notch customer experiences. With operations in over 80 countries, Starbucks has pioneered innovative retail strategies, digital engagement, and sustainable practices, substantially influencing global coffee culture.
Starbucks: A “Large-Cap” Player with Mixed Results
Falling into the “large-cap” category, companies valued at $10 billion or more easily describe Starbucks. What started as a single shop in Seattle has grown into a worldwide coffee empire, known for its growth consistency.
Recent Stock Performance Reflects Market Trends
Currently, Starbucks is slightly below its 52-week high of $103.32, reached on November 25. In the past three months, shares of Starbucks gained 8%, yet this still lagged behind the Consumer Discretionary Select Sector SPDR Fund’s (XLY) significant 20.6% gains.
Over the year, SBUX has achieved a 6.7% YTD gain and a 2.6% increase over the last 52 weeks. In comparison, XLY experienced a remarkable 24.3% growth in 2024 and 31.5% over the past year.
Trends Indicate Potential for Recovery
Since mid-August, SBUX has been trading above its 200-day moving averages and its 50-day moving averages since early November, suggesting a positive price trend.
Q4 Results Show Struggles Amid New Openings
Starbucks released its Q4 earnings on October 30, which led to a slight rise in stock price afterward. The company reported a 7% drop in global comparable store sales. Despite this, Starbucks opened 722 new locations, increasing its total to 40,199 stores. Consolidated net revenues experienced a 3% year-on-year decrease to $9.1 billion when taking constant currency into account.
Operating margins also encountered a significant dip, with GAAP operating margin down 380 basis points to 14.4%. This decline is mainly attributed to increased spending on staff wages, benefits, and promotional activities. Both GAAP and non-GAAP earnings per share fell by 25%, indicating ongoing financial pressure.
Competitive Landscape and Analyst Outlook
Meanwhile, McDonald’s Corporation (MCD) has performed better, seeing a 5.6% increase over the past year, surpassing Starbucks during the same period. While SBUX has not kept pace with its competitors in the food and beverage sector over the last year, analysts hold a cautiously optimistic view of its future. Currently, the stock has a consensus rating of “Moderate Buy” from 29 analysts and a mean price target of $103.92, indicating a potential upside of 1.4% from its current valuation.
On the date of publication, Rashmi Kumari did not hold any positions in the securities mentioned in this article. All information provided in this article is for informational purposes only. For further details, please view the Barchart Disclosure Policy here.
The views expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
