Should You Invest in Starbucks Following Q4 Results?

Should You Invest in Starbucks Following Q4 Results?

November 11, 2022 0 By Alicia Hagen
  • Starbucks announced massive Q4 results.
  • Starbucks coffee enjoys heightened demand.
  • Starbucks remains on the market’s pricier side.

Starbucks Corporation announced better-than-anticipated Q4 results the previous week. Interim CEO Howard Schultz stated that the firm witnessed increased demand for coffee globally during the fourth quarter.

Accelerating Starbucks Coffee Demand

Starbucks announced steady Q4 results this Thursday. Total revenue gained 3.2% year-on-year to $8.41B, briefly beyond expectations. Meanwhile, non-GAAP earnings were $0.81 per share, beating by $0.09.

The fourth quarter saw global comparable sales gain 7%, and it’s noteworthy that the company opened 763 new stores over the quarter, ending the period with 35,711 stores worldwide. Howard stated that Starbucks coffee saw increased demand in 2022 and Q4 globally.

He added that the fourth quarter results reflect the success of their United States Reinvention investments. The negative news is China’s comparable store sales plummeted by 24%. Also, investors should beware that the drop emerged fur to a 22% drop in transactions because of COVID-related restrictions in primary cities.

Nevertheless, Starbucks is confident about China’s upside. It trusts that the Chinese coffee market is in its infancy stages. Q4 earnings place Starbucks to ensure sustainable, accelerates, profitable, value creation, and long-term business in FY 2023.

What about the fundamentals? The 26.9 P/E (price-to-earnings) ratio places Starbucks on the market’s pricier side, considering that most US stock market companies boast P/E ratios beneath 15 at the moment. Indeed, Starbucks has grown dividends for years, with a 21% average yearly growth within the last ten years.

Nevertheless, the current 2.3% dividend yield isn’t attractive amidst present economic situations, plagued with Fed’s aggressiveness.

The risk-reward ratio isn’t lucrative for ‘value’ market players, and the stock might dip further if the United States stock market enters a more substantial correction phase.

Technical Analysis

The past several days have seen Starbucks shares advancing, and bulls dominate price action (at the moment). Also, the price moved beyond the ten-day MA – a positive signal. Moreover, SBUX isn’t inexpensive at current prices.

Meantime $90 represents support, while upside moves will encounter resistance at $100. Price dips beneath $90 will reveal a sell sign, opening the gates to $85. Also, climbing beyond $100 would confirm $105 as the next target, clearing the path to $110.