Nov 02, 2023

Shares of Starbucks are trading in a tight range after an October bounce that followed a recent downturn for the stock. 

SBUX chart

SBUX – Daily Chart

The price of SBUX now trades at $91.51, and the path following earnings will depend on the range of $89-95. A breakout in either direction should see additional gains or losses in the following weeks. 

Starbucks stock trades around a price-to-earnings ratio of 27X, at the higher end of a three-year range of 21-33. The stock is still a reliable performer for dividends and consumer purchasing. 

The company’s latest Q3 operating margins grew from 15.9% in 2022 to 17.4% in 2023, with sales leverage, increased pricing, and productivity improvement being the drivers. Starbucks’ long-term operating outlook is built on a strong consumer brand and its ever-expanding store footprint. China is an important market, and according to the Q3 results, China’s revenue grew 50% when compared to the lockdown period in the country. There are also signs that China’s coffee consumption is expanding, which will help to drive further growth. Starbucks plans to continue investing significantly in the region to enhance its digital capabilities and accelerate its rewards program. For the full-year 2023, the company expects to post revenue growth of 10% to 12% and EPS growth of 16% to 17%. 

A recent look at Wall Street analyst expectations has 20 hold ratings and 4 buys. With 9 Strong Buy ratings, there are zero Sells from the 33 surveyed. It is still possible that the company will take analysts by surprise in the coming weeks with further losses. However, the company is a trusted stock which offers diversification and will be on the radar of value investors. 

SBUX stock has declined around 15% since early January 2021, when it traded around $105.

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