Seattle-basedStarbucks(SBUX) emerged as a coffeehouse giant in the 1990s with a meteoric rise, evolving from a local concept into a global brand. Amid the current stock market rally, is Starbucks stocka buy?
Starbucks Earnings
In themost recent quarter— reported on Jan. 26 — Starbucks reported mixed fiscal Q1 results and gave weak Q2 views despite a forecast for China same-store sales to nearly double.
Starbucks reported EPS of 61 cents on revenue of $6.75 billion. Wall Street expected Starbucks earnings per share to fall 30% to 55 cents, according to Zacks Investment Research. Revenue was seen tilting 3% lower to $6.87 billion.
According to theIBD Stock Checkup,Starbucksstock has a weak 37 out of a highest-possible 99 IBD Composite Rating. TheComposite Ratingis designed to help investors easily measure a stock's fundamental and technical characteristics.
Fundamentally, the company boasts a deteriorating track record of earnings growth, resulting in a 33 (out of a best-possible 99) EPS Rating. TheEPS Ratingmeasures a company's current quarterly earnings and annual earnings growth.
Starbucks Stock News
On March 15, amid the spreading coronavirus outbreak,Starbucks movedinto a "to-go" model for its stores in the U.S. and Canada for at least two weeks. Starbucks also said some of its stores in "high-social gathering" areas will be shuttered to help prevent the spread of the virus. The moves came in the wake of the U.S. government's call for more social distancing.
On April 16, Starbucksannounced plans to reopenstores that closed during the coronavirus outbreak. In a letter to employees, CEO Kevin Johnson said, "As we have experienced in China, we are now transitioning to a new phase that can best be described as 'monitor and adapt."
In late April, the company said it would start reopening U.S. stores as soon as early May, with plans to have around 90% of company-run locations open by early June with modified hours and more safety measures, but management said "routines may look a little bit different" even for its most loyal customers.
On May 4, the the coffee giant said it plans to reopen more than 85% of its U.S. corporate stores by end of this week. Dine-in services will remain closed for the time being.
In a letter to employees on May 21, CEO Kevin Johnson said the company has reclaimed about 60% to 65% of its U.S. same-store sales over the last week, vs. the same period a year ago.
Starbucks CFO Patrick Grismer, during a conference in September, said the coffee giant was on track to reach positive same-store sales in the U.S. by the end of its fiscal second quarter.
Is Starbucks Stock A Buy Right Now?
During the coronavirus stock market crash, Starbucks shares fell nearly 50% off their 52-week high. After a sharp rally, the stock hit all-time highs on Jan. 4 before backing off. Starbucks is trying to break out above a 108.85 buy point in a new flat base, according toMarketSmithchart analysis. The 5% buy zone goes up to 114.29.
Starbucks stock tumbled nearly 2% Monday despite a price-target hike at Stifel Nicolaus. The analyst firm raised its price target from 115 to 125. The stock remains out of buy range. So, Starbucks is no longer a potential buy right now since it's out of buy range. Meanwhile, a lack of strong fundamentals could be a deterrent to growth investors.
For more leading stocks and stocks approaching buy points, check out these IBD Stock Lists, like the Stocks Near A Buy Zone. To see the current stock market trend, check out IBD's signature daily analysis, The Big Picture.
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on stock market analysis and insight.
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