Starbucks Stock Forecast June 2021 – Good Time to Buy Starbucks Stock?

Starbucks stock is up 5.6% so far in 2021 and is underperforming the S&P 500. The stock is now down 5.6% from its 52-week highs. What’s the forecast for SBUX stock and is it a good time to buy the stock?

Starbucks was founded in 1971 and has almost 33,000 stores worldwide. Out of these over 4,900 stores are in China which is a major market for the company.

SBUX stock technical analysis

SBUX stock has been trading in a narrow price channel between the 50-day and 100-day SMA (simple moving average). The 100-day SMA, which is currently at $109.52 has been strong support for the stock while it is facing resistance at the 50-day SMA which is at $112.91 currently. The stock needs to break out of the narrow trading range for a new trend to emerge. Starbucks stock has a 14-day RSI (relative strength index) of 51.2 which is a neutral indicator and indicted neither overbought nor oversold positions.

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Starbucks stock price forecast

According to the consensus estimates compiled by CNN Business, Starbucks’ median target price of $125 is an 11.4% upside over current prices. Its lowest target price is $104 while $142 is its highest target price.  Of the 31 analysts covering the stock, 19 have a buy rating while the remaining 12 rates them as a hold. None of the analysts have a sell rating on SBX stock.

Earlier this month, Wells Fargo maintained its overweight rating on the stock and increased the target price to $133. Analyst Jon Tower expects the stock’s valuation multiples to expand as sales and margins expand this year. Tigress Financial analyst Ivan Feinseth also maintained is buy rating on the stock and assigned a target price of $130.

In April, Atlantic Equities had also initiated coverage on Starbucks with a buy rating and called the stock a top idea. “Starbucks remains well positioned, levered to the improving consumer economy as mobility recovers, especially in the US where Starbucks is largely an owner/operator, as well as in China where Starbucks is deepening its market penetration with its store count expected to surpass 5,000 in FY21,” said Atlantic Equities in their note.

SBUX dividend

Last week, SBUX announced a quarterly dividend of $0.45 per share. The dividend has a record date of 12 August and will be payable on 27 August. Based on the current stock price, the dividend yield works out to be around 1.5% which is in line with the S&P 500’s dividend yield. Notably, S&P 500’s dividend yield is running way below its historical average due to multiple reasons including the inclusion of Tesla which does not pay a dividend.

Starbucks is expected to witness a growth turnaround

Starbucks reported an 11.3% fall in revenues in the fiscal year 2020 that ended in September 2020. The restaurant and hospitality sector was among the worst performers in 2020 as the COVID-19 restrictions led to a steep fall in revenues. However, the company’s revenues are expected to rise 22.4% in the fiscal year 2021 to $28.7 billion. Notably, the sales in the fiscal year are expected to be above the pre-pandemic levels, a sign that things are turning normal for Starbucks.

The company’s EBITDA is also expected to rise to $6.3 billion in the fiscal year 2021 which is 89% higher than the previous fiscal year. The company’s growth is expected to continue in the next fiscal year also albeit at a slower pace than this year. Analysts expect Starbucks to report revenue and EBITDA of $31.3 billion and $7.3 billion in the fiscal year 2022, a year-over-year rise of 8.9% and 16.1% respectively.

SBUX stock valuation

SBUX stock currently trades at an NTM (next-12 months) EV (enterprise value)-to-EBITDA multiple of 22.1x. The multiple has averaged 23.8x, 19.6x, and 17.5x over the last one year, three years, and five years respectively. The current valuation multiples are higher than the long-term averages.

Bill Ackman exited his position in Starbucks

Last year, Bill Ackman added to the stake in Starbucks and his Pershing Square Capital held almost 1% stake in the company valued at over $1.1 billion. However, Ackman said in June that he has exited the entire stake and instead bought Domino’s Pizza stock. Ackman rose to fame last year after he successfully bet against the credit markets and made over $2 billion from the trade. Ackman’s bet would go down in history as among the iconic traders of all times.

“It’s (Domino’s) a very compelling story and big international growth opportunity … and there’s plenty of room to run both here and abroad,” said Ackman. He was apprehensive about Starbucks after the sharp rise in the stock. SBUX stock is up over 53% over the last year as investors have bought beaten-down restaurant stocks amid optimism over the reopening.

Wait to buy SBUX stock

SBUX is a globally renowned brand and has strong brand equity. The company should also see earnings rebound considering the reopening. However, the growth looks priced in the stock at current prices. However, Starbucks stock would start to look attractive if it were to correct from these levels.

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