Starbucks (NASDAQ:SBUX) certainly hasn’t been a darling of the markets in 2023. However, now the sellers need to wake up and take a close look at Starbucks’ still-fresh round of quarterly results. I am bullish on SBUX stock and wouldn’t be surprised if its shares gain value through the remainder of the year.
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Starbucks operates a chain of popular retail coffee shops that also sell food items and coffee-related accessories. Some investors may have worried that Starbucks’ sales would falter in China, which has experienced economic pressure in 2023.
They might have also been concerned about whether people in the U.S. would spend money on relatively expensive coffee. So, let’s delve into the facts and figures and see if Starbucks stirred up a cup of piping-hot results to keep the sellers at bay.
Two Analysts Cut Their Price Targets on Starbucks Stock
In recent weeks, not just one but two prominent analyst firms reduced their price targets on SBUX stock. At the same time, their commentary seemed fairly optimistic about Starbucks.
First, Wedbush lowered its price target on Starbucks stock from $105 to $100 and maintained a Neutral rating on the shares. Yet, according to TheFly, the Wedbush analysts anticipated “continued international growth strength” for Starbucks, as well as “U.S. same-store-sales growth trending above consensus” for Fiscal Year 2024.
Just like Wedbush, Baird cut its price target on Starbucks stock from $105 to $100 and reiterated a Neutral rating on the shares. Furthermore, much like the Wedbush analysts, the Baird analysts apparently expected Starbucks to post satisfactory results for FY2024.
I don’t recommend panic selling SBUX stock just because Starbucks got hit with two price-target cuts. Bear in mind that Starbucks’ share price fell to the $90 area not long ago. When something like that occurs, it’s normal for analysts to adjust their price targets accordingly.
As for the two aforementioned Neutral ratings, this isn’t anything to worry about. As we’ll discuss in a moment, Starbucks has a half-dozen Buy or equivalent ratings on Wall Street. Besides, Starbucks’ most recently released round of quarterly results should convince you — and the skeptical analysts, for that matter — to raise your price expectations for Starbucks stock.
No Worries as Starbucks Sells Plenty of Cups of Coffee
Will people buy pricy coffee during times of sticky inflation? Starbucks provided an affirmative answer to this question with the company’s financial results for the third quarter of 2023.
For one thing, the company seems to be selling plenty of cups of coffee in North America. Specifically, Starbucks’ North American and U.S. comparable-store sales grew by 8% year-over-year.
What about China and its economic challenges, though? No need to worry about that, as Starbucks’ comparable-store sales in China increased by 5% year-over-year. That’s a surprisingly positive result, wouldn’t you agree?
Now, let’s look at the main quarterly results. Starbucks’ revenue in Q3 2023 totaled $9.2 billion, up 12% year-over-year. This figure fell short of the consensus estimate of $9.29 billion, but it still indicated decent growth.
In addition, Starbucks knocked it out of the park with adjusted earnings of $1 per share for the quarter. That’s up 19% year-over-year and ahead of the consensus estimate of $0.95 per share.
Is SBUX Stock a Buy, According to Analysts?
On TipRanks, SBUX comes in as a Moderate Buy based on six Buys and 10 Hold ratings assigned by analysts in the past three months. The average Starbucks stock price target is $107.25, implying % upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell SBUX stock, the most profitable analyst covering the stock (on a one-year timeframe) is David Palmer of Evercore ISI, with an average return of 20.06% per rating and a 74% success rate. Click on the image below to learn more.
Conclusion: Should You Consider SBUX Stock?
Starbucks CEO Rachel Ruggeri remarked that she was “pleased” with the company’s quarterly performance. I don’t blame her for taking pride in Starbucks’ results, including the company’s same-store sales in China.
The market seems to concur with Ruggeri’s proud assessment. Just take a look at today’s price action in Starbucks stock. Clearly, investors recognized Starbucks’ solid results.
So, in case you couldn’t tell by now, I feel that investors should definitely consider SBUX stock. Starbucks hasn’t been a darling of the market in 2023 so far, but a higher re-rating of the company and its stock could easily happen in the near future.
