Has Starbucks Affected by the Citigroup’s 12 Month Target Revision?
Starbucks Corporation [NASDAQ: SBUX], a leading player in the Consumer Cyclical sector that operates worldwide as a marketer, roaster, and specialty coffee retailer, recently received an unexpected revision in Citigroup’s 12-month target from $130 to $105. This news has caused some investors to rethink their investment strategy in SBUX. We shall explore Starbucks’s financial performance, analyst coverage, current news, and ratings, along with sector analysis.
How Has Starbucks Performed Financially?
Based on trailing 12 months (TTM) analysis, Starbucks has experienced a 1-Year Capital Gain of -3.5%, landing it at the 54th percentile within the sector. However, the corporation mitigated some losses through a 1-Year Dividend Return of 1.58%, resulting in a 1-Year Total Return of -1.92%.
On the brighter side, over a five-year period, the company’s revenue and earnings have grown by 4.96% and 5.02%, respectively. When benchmarked against sector peers, its revenue growth earned a placement comfortably above the median at the 66th percentile, whereas earnings growth fell short past the median at the 34th percentile.
In terms of profitability ratios, Starbucks excelled with Return on Assets (RoA) and Return on Equity (RoE) registering 11.29% and 31.35%, respectively. Furthermore, Return on Invested Capital (RoIC) stood at 13.88%, and the firm has maintained a healthy Debt Equity Ratio of 2.79.
Valuation ratios might be an area of concern for potential investors. Their Price to Earnings Ratio is high at 30.24 and their high Price to Book Ratio of 14.91 and Price to Cash Flow ratio of 23.68 raise eyebrows.
Finally, risk-averse investors can find solace in Starbucks’s low stock volatility demonstrated by a Beta of 0.63.
What’s the Analysts’ Take on Starbucks?
The Buy rating from a panel of 19 analysts, an average Target Price of $130.47, and a range of target prices between $109 and $152 suggest that despite the downgraded target from Citigroup, analysts, in general, remain optimistic about Starbucks’s prospects.
How has Starbucks Fared Recently?
The Quarterly Results for Starbucks have shown a steady rise, with the revenue for Q3, 2023, standing at $9.96 billion, and Net Income at $1.25 billion. This represented an improvement over Q2, 2023, when revenue was $8.74 billion, and Net Income was $1.01 billion.
What Does the Consumer Cyclical Sector Outlook Look Like?
If we zoom out and look at the sector as a whole, the average rating is a Buy. Considering the average 1-Month Return on stocks in the Consumer Cyclical sector stands at 4.86% and the 1-Week return at 1.32%, the sector is currently performing steadily.
Bottomline: Should Investors Continue to Bet on Starbucks?
Given Starbucks’s consistent growth, strong financials, and positive coverage from a majority of analysts, it continues to present itself as a compelling buy opportunity. While Citigroup’s adjustment of their 12-month target price may have caused some consternation, it is worth remembering that investment considerations should be based on a holistic view of the company’s long-term prospects rather than particular short-term price targets. Based on the provided data, Starbucks remains a sound investment option within the Consumer Cyclical sector, offering potential for further growth and solid returns.
STA Research (StockTargetAdvisor.com) is a independent Investment Research company that specializes in stock forecasting and analysis with integrated AI, based on our platform stocktargetadvisor.com, EST 2007.
