Is Starbucks Stock A Good Buy Right Now? – (SBUX)
Wednesday saw Starbucks stock price increase by over 1.2%. A decrease in coffee prices and increase in selling prices have ensured that Starbucks margins remain high. Over the last three months, Starbucks stock has taken advantage of falling coffee prices. This month was detrimental to coffee futures, which fell below $100.00 per pound. This is the lowest that coffee futures has been in years. To boost profits, Starbucks have increased by price of a tall coffee at almost 8,000 locations. It seems like the price hike has worked, as Starbucks forecast increased profits.
To shake things up even further, the company has recently announced plans to change its corporate structure. The CEO of Starbucks, Kevin Johnson, has been vocal about these changes as he says that they are in place to bring product innovation forward. Not to mention, there are a collection of new menu items at over 28,000 stores worldwide. By introducing new products to market, Starbucks is taking less pressure of its signature products to perform so well.
Starbucks Future Growth
Next hit this week that Starbucks will begin layoffs, which is part of its plans for corporate structure change. This reflects on weak sales, which may be even weaker than management predicted when it gave guidance in July for Q4.
These layoff’s are not the result of poor sales this quarter. Starbucks has been struggling this past year, with sales growth near 1% year-over-year for July’s quarter. The next few years are not looking very optimistic for Starbucks, as annual growth rate is around 3% for the next few years, according to Statista.
Starbucks Stock Prediction
As of now, the upside for Starbucks stock is seemingly low. The average analyst price target on SBUX stock is a low rise of 1.5% to $58.20.
The reason why the forecast of Starbucks stock is low is due to the possible issues the company may face in the long-term. Because of trade war talks between the U.S and China, it may be harder to grow its business in China. Also, it appears that Starbucks is struggling to maintain growth in North-America.
SBUX stock is no longer a ‘cheap-buy’ for investors. It is trading 22 times its 2019 earnings estimates, which is an expensive investment considering its poor upside potential. Earnings growth in 2019 is predicted to decrease to 10% from this year’s 16%. Meaning that investors are paying more than twice the company’s earnings growth rate. With a PEG ratio of 2.12.
When looking from the technical side of things, Starbucks stock has been rallying since the start of July. Although, its trendline resistance near $57.50 is nearing. An RSI reading of 75.09 may indicate the stock could be seeing near-term increase.
Starbucks revenue growth is also predicted to decrease fiscal 2019 from 10% (2018) to 6%.
Short-term, Starbucks stock looks strong with increasing momentum. In order for Starbucks stock to keep rising, investors must be convinced that the company has ironed-out its long-term problems.
Starbucks Stock Dividend
Starbucks stock dividend decreased from 2014-2015 by half. Since 2015, Starbucks dividend cash amount has increased marginally which may entice investors who are on the fence about SBUX stock.