Nicole WillingThe Starbucks (SBUX) share price has pulled back from the all-time high reached in the summer. Does that present an opportunity for investors to buy into the stock ahead of further gains?
The share price started accelerating to new highs last November, when the first Covid-19 vaccines were announced, raising expectations of the reopening of economies and a return to regular consumer activity around the world.
What do the latest Starbucks stock predictions indicate about the share price’s direction?
Let’s look at the stock’s recent performance to help you decide whether to invest in Starbucks before this year comes to an end.
Starbucks expands stores for post-pandemic growth
Starbucks expects sales to rise in 2021 after Covid-19 lockdowns in 2020. The company said in its most recent quarterly results that it expects global comparable store sales to grow by 20%–21% this year, from a previous forecast of 18%-23% growth.
The company opened 352 net new stores during the third quarter of its 2021 financial year to 27 June, ending the period with a record 33,295 globally. Around 51% of those stores were operated by Starbucks, with the other 49% operating under licence. The US and China accounted for 62% of the company's store portfolio, with 15,348 in the US and 5,135 in China.
The company’s consolidated net revenues climbed by 78% year-on-year to $7.5bn, reflecting the impact of pandemic-induced disruption in the third quarter of the previous financial year and strength in the company-operated US stores during the current year.
Starbucks announced on 29 September that it will increase its quarterly dividend from $0.45 a share to $0.49 a share in November, lifting the annual dividend to $1.96 a share. Starbucks has increased its payment to shareholders each year since it initiated the dividend in 2010.
Starbucks will release its fourth quarter and financial year end results report after the market closes on 28 October.
Profit margins could tighten on rising global coffee prices, after cold weather in July exacerbated the impact of an ongoing drought in Brazil, the world’s largest coffee producer. Supply chain disruptions worldwide caused by the pandemic have further increased costs, with shipping prices soaring.
SBUX price analysis: stock retreats from all-time highs
The share price reached a record high of $126.32 in July ahead of the company’s quarterly earnings announcement – up by 18% from the start of 2021. The share price has risen by more than 117% since the March 2020 low of $58.03.
The price has since retreated, trading down by 12.7% from $110.31 on 30 September, leaving it up by around 3% year-to-date. The price has ticked up to the $111–$112 a share range in the first trading days in October. The stock ended its latest trading session, on 4 October, at $111.46 a share.
A rise in Covid-19 cases in China prompting renewed restrictions in August raised concerns about the impact on Starbucks sales, weighing on the share price. In addition, employee shortages in the US have lifted wage growth, increasing labour costs.
Keep in mind that past performance is no indicator of future returns.
Is Starbucks a good long-term investment? Let’s check what the latest price predictions suggest.
Starbucks stock projections: will the share price rise to new highs?
What do analysts predict – is Starbucks stock a buy or sell? The average 12-month price target from 26 analysts that have issued an SBUX stock price target is $127.16, with a low estimate of $104 and a high of $145 a share, according to MarketBeat.
Analysts at Atlantic Securities downgraded the stock on 30 September from overweight to neutral, with a price target of $105 a share, on concerns about US labour costs. That followed analysts at Stifel Nicolaus on 20 September reducing their SBUX stock forecast to $130 a share from $135, while maintaining a buy rating.
JC O’Hara, an analyst at MKM Partners, told CNBC on 30 September that “as a technical analyst, it’s very hard for me to like this technical setup… trends are deteriorating. Our internal trend model turned negative last week. If you look at the price versus its 150-day [moving average], it just recently broke below. If you look at the 200-day moving average, we’re on the verge of breaking below that level… and even more important than absolute trend is just the relative performance… Starbucks is on the verge of making a fresh 52-week relative low versus the benchmark [S&P500], so you’re losing absolute ground and relative ground.
Quint Tatro, of Joule Financial, is also bearish on the stock’s short-term outlook, telling CNBC: “Starbucks from a valuation perspective the stock is very rich, trading 30 times forward earnings and you would expect in this sort of great reopening that the company would be firing on all cylinders, growing earnings at an exceptional clip and they’re not. They’re projected to grow those earnings at about 17%, so that’s pretty rich, so I agree with that downgrade.”
In the meantime, algorithm-based forecasting site Wallet Investor is bullish in its long-term Starbucks share price forecast. It predicts the price will move up to $116.630 by the end of December, then climb during 2022 to $133.249 and reach $183.265 by the end of 2025.
Gov Capital, which uses machine learning to predict long-term prices for stock, cryptocurrencies and commodities, projects that the price will reach $124.64 by the end of 2021, rising to $205.73 by the end of 2022 and reaching $551.26 by the end of 2025.
The artificial intelligence-based forecast from AI Pickup projects that the average price for Starbucks stock will reach $195.51 by 2030, after declining to $32.72 in 2025.
When considering analyst commentary or predictions from algorithm-based forecasting services, it’s important to keep in mind that they can get their estimates wrong. You should always do your own research to form a view of the outlook for an asset and consider relevant market conditions.
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FAQ
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