Starbucks Corporation (NASDAQ: SBUX) shares have been moving in an uptrend last several months, and according to technical analysis, there is no risk of the bear market for now. Starbucks has a very good position in the market, but the current share price does not provide an attractive entry point for long-term investors.
Fundamental analysis: Starbucks lifted revenue guidance for the 2021 fiscal year
Starbucks is an American multinational chain of coffeehouses and roastery reserves that operates over 30,000 locations worldwide in more than 70 countries. Starbucks reported its second-quarter results in the last week of April; total revenue has increased by 11.2% Y/Y to $6.67 billion, while the GAAP EPS was $0.56 (beats by $0.05).
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Total revenue has increased below the expectations (-$110 million) mainly due to the Covid-19 pandemic. It is important to say that comparable-store sales rose by 9% in the U.S while comparable-store sales in China jumped by 91%.
Starbucks lifted revenue guidance for the 2021 fiscal year to $28.5 billion – $29.3 billion (the previous midpoint was $28.5 billion). The company expects non-GAAP EPS in the range of $2.90 to $3 for the 2021 fiscal year, while the board of directors says that a full comparable sales recovery is expected by the end of 2022.
Starbucks began the third quarter in a strong position, but the global COVID-19 pandemic continues to pose downside risks to the recovery. Concerns over the pace of vaccination campaigns in many parts of the world still represent an issue; still, analysts point to more upside potential for the price of this company shares.
Analyst firm Cowen sees Starbucks as a favorite restaurant reopening pick while analyst Peter Saleh from research company BTIG assigned a buy rating on Starbucks with the price target of $130.
“We believe Starbucks could continue to top EPS expectations given the sales recovery in the U.S., near full recovery in China, and margin benefits from the trade area transformation… we still see the opportunity for upside,” said analyst Peter Saleh.
Despite this, the current risk/reward ratio is not good enough for “value” investors, lots of positive expectations have already been included in the stock price, and probably it is not the best moment to invest in Starbucks shares. Starbucks trades at almost forty times TTM EBITDA, the current dividend yield is around 1.5%, and we can notice that this stock is not undervalued.
Technical analysis: Starbucks shares are trading above the pre-pandemic levels
Starbucks shares are trading above the pre-pandemic levels, and if the U.S. stock market enters a more significant correction phase, the share price could be at much lower levels.
If the price falls below $100 support, it would be a firm “sell” signal, and the next target could be around $90. On the other side, if the price jumps above $120 resistance, it would be a signal to trade Starbucks shares, and the next target could be around $125 or even $130.
Analyst firm Cowen sees Starbucks as a favorite restaurant reopening pick while analyst Peter Saleh from research company BTIG assigned a buy rating on Starbucks with the price target of $130. Despite this, the current risk/reward ratio is not good enough for “value” investors, and probably it is not the best moment to invest in Starbucks shares.
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