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Commanding a market cap of about $90.8 billion, Washington-based Starbucks Corporation (SBUX) is a global icon in the coffeehouse industry. Renowned for its diverse coffee offerings, Starbucks also offers a wide array of complementary food items and premium teas. Its portfolio includes popular brands such as Starbucks coffee, Teavana tea, Seattle's Best Coffee, La Boulange bakery products, and Evolution Fresh juices.
Companies valued at $10 billion or more are generally classified as "large-cap" stocks and Starbucks comfortably fits this criterion, underscoring its strong market presence. As a pioneer in promoting coffee culture, Starbucks strategically established its unique brand and solidified its global presence with over 38,000 stores worldwide. By focusing on high-quality coffee and creating welcoming coffeehouse environments, Starbucks redefined coffee as an affordable luxury.
However, the coffee giant is down 25.5% from its 52-week high of $107.66, achieved in November last year. Shares of SBUX have plunged nearly 11.9% over the past three months, underperforming the broader Nasdaq Composite's ($NASX) 10.9% gains over the same time frame.
Longer term, SBUX is down 16.5% on a YTD basis, lagging behind the NASX's around 19% gains. Moreover, shares of SBUX have declined 21.3% over the past 52 weeks, compared to NASX's 30.5% return over the same time frame.
To confirm its bearish price trend, the stock has been trading below its 200-day moving average since December last year and also remained mostly below its 50-day moving average during this period, despite some fluctuations.
Despite its strong market presence, Starbucks has been battered down by intense competition in the coffee and quick-service restaurant sectors, along with shifts in global economic conditions affecting consumer spending patterns. Fluctuations in coffee prices and the complexities of adjusting to a post-pandemic economy have further strained its performance in the market.
Moreover, following its lackluster Q2 earnings results revealed last month, the company’s shares tumbled a notable 16%. In the U.S., Starbucks experienced a 3% decline in same-store sales, a stark contrast to the 12% increase from the previous year, with store traffic dropping by 7%. Meanwhile, in China, comparable-store sales sank 11% compared to a 3% increase a year ago, and store traffic fell by 4%.
To emphasize the extent of the stock's underperformance, it’s worth noting that while SBUX’s rival, McDonald's Corporation (MCD), declined by 14.6% over the past 52 weeks and 15.4% on a YTD basis, SBUX experienced an even steeper plunge during both these periods.
Despite SBUX’s underwhelming price action, analysts are cautiously optimistic with a consensus rating of "Moderate Buy" from 26 analysts. The mean price target of $92.84 suggests a 15.8% upside potential from current levels.
On the date of publication, Anushka Mukherjee did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
