Starbucks (NASDAQ: SBUX) is set to report its Q3 2024 results on July 30, and experts believe that the coffee giant’s stock could see gains as revenues and earnings are expected to slightly beat expectations. Despite a decline in stock value from $93 to $73 year-to-date, Starbucks remains a strong player in the coffee industry, with significant growth potential in the United States, China, and beyond. Inflationary pressures have affected the company’s previous earnings, but the overall business model of Starbucks is well-positioned for long-term success as it offers premium coffee products with strong repeat purchases.
Over the past few years, Starbucks stock has faced fluctuations, with a 25% decline from early 2021 to the current level of $73. The stock underperformed the S&P 500 index in 2021 and 2023, but the overall outlook for the company remains positive. The Trefis High Quality Portfolio has consistently outperformed the S&P 500, indicating that some individual stocks, including Starbucks, may face challenges in beating the benchmark index in uncertain macroeconomic environments like the current one. However, Starbucks’ growth potential and resilient business model could lead to a recovery in stock performance in the future.
Trefis estimates that Starbucks’ valuation is $80 per share, which is approximately 9% higher than the current market price. The company’s Q3 2024 revenues are projected to be around $9.3 billion, slightly exceeding consensus estimates. The decline in comparable sales in Q2 was mainly attributed to rising operating costs, increased promotional activities, and higher wages. China, where 18% of all Starbucks stores are located, saw the worst decline in comparable sales. Despite these challenges, Starbucks is expected to generate revenues of $36.7 billion for fiscal year 2024, marking a 2% year-over-year increase.
Starbucks’ Q3 2024 earnings per share are anticipated to be 95 cents according to Trefis analysis, slightly higher than the consensus estimate. In fiscal Q2 2024, the company reported adjusted EPS of $0.68, which was below expectations and represented a 7% year-over-year decrease. The company’s operating margin in Q2 was also lower than its ten-year average, indicating some challenges in profitability. With an EPS estimate of around $3.75 and a P/E multiple of 21.4x in fiscal 2024, Starbucks’ stock price is estimated to reach $80, reflecting a 9% increase from the current market price.
In conclusion, despite facing challenges in the past year, Starbucks remains a strong player in the coffee industry with significant growth opportunities. The company’s Q3 2024 results are expected to beat consensus estimates, signaling a potential turnaround in stock performance. With a compelling price-to-earnings ratio and continued growth prospects, Starbucks’ stock could see gains in the future, especially as the company continues to expand its presence in key markets like the United States and China.
