ValuEngine Rates Starbucks A SELL

For today’s bulletin, we take a look at Starbucks $SBUX. We also provide a link to download a FREE STOCK REPORT on the company.


VALUATION WATCH: Overvalued stocks now make up 49.1% of our stocks assigned a valuation and 17.44% of those equities are calculated to be overvalued by 20% or more. Ten sectors are calculated to be overvalued.


Starbucks Corporation (SBUX) purchases and roasts high-quality whole bean coffees and sells them along with fresh, rich-brewed, Italian style espresso beverages, a variety of pastries and confections, and coffee-related equipments primarily through its company-operated retail stores. In addition to sales through its company-operated retail stores, Starbucks sells whole bean coffees through a specialty sales group and supermarkets. Additionally, Starbucks produces and sells bottled Frappuccino coffee drink and a line of premium ice creams through its joint venture partnerships and offers a line of innovative premium teas produced by its wholly owned subsidiary, Tazo Tea Company. The company’s objective is to establish Starbucks as the most recognized and respected brand in the world.

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Big news in the world of coffee today as it was announced that Nestle is buying the rights to Starbucks’ retail marketing and sales business for $7 billion. This global coffee alliance will allow Nestle to obtain the rights to market, sell, and distribute Starbucks®, Seattle’s Best Coffee®, Starbucks Reserve®, Teavana™, Starbucks VIA® and Torrefazione Italia® packaged coffee and tea in all global at-home and away-from-home channels.

Kevin Johnson, president and chief executive officer, Starbucks, said that

This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestlé. This historic deal is part of our ongoing efforts to focus and evolve our business to meet changing consumer needs, and we are proud to work alongside a company that is committed to our shared values.

The sale will provide Starbucks with a big cash infusion, and that cash may help investors. Starbucks intends to use the after-tax proceeds from this up-front payment primarily to accelerate share buybacks and now expects to return approximately $20 billion in cash to shareholders in the form of share buybacks and dividends through fiscal year 2020. Additionally, the transaction is expected to be earnings per share (EPS) accretive by the end of fiscal year 2021 or sooner, with no change to the company’s currently stated long-term financial targets.

Meanwhile, our models have been down on the stock of late, and we continue our SELL recommendation on Starbucks for 2018-05-04. Based on the information we have gathered and our resulting research, we feel that Starbucks has the probability to UNDERPERFORM average market performance for the next year. The company exhibits UNATTRACTIVE Book Market Ratio and Momentum.

Of course, this may change as analysts update their earnings estimates and the stock price changes if the firm follows through on their buyback plans.

You can download a free copy of detailed report on Starbucks (SBUX) from the link below.

ValuEngine Forecast
1-Month 57.42 -0.45%
3-Month 57.61 -0.12%
6-Month 56.20 -2.56%
1-Year 54.59 -5.36%
2-Year 54.97 -4.70%
3-Year 55.06 -4.54%
Valuation & Rankings
Valuation 5.23% undervalued Valuation Rank(?) 61
1-M Forecast Return -0.45% 1-M Forecast Return Rank 20
12-M Return -5.18% Momentum Rank(?) 27
Sharpe Ratio 0.83 Sharpe Ratio Rank(?) 89
5-Y Avg Annual Return 12.76% 5-Y Avg Annual Rtn Rank 79
Volatility 15.44% Volatility Rank(?) 78
Expected EPS Growth 12.25% EPS Growth Rank(?) 37
Market Cap (billions) 43.27 Size Rank 97
Trailing P/E Ratio 24.93 Trailing P/E Rank(?) 50
Forward P/E Ratio 22.21 Forward P/E Ratio Rank 25
PEG Ratio 2.04 PEG Ratio Rank 16
Price/Sales 1.84 Price/Sales Rank(?) 51
Market/Book 51.64 Market/Book Rank(?) 4
Beta 0.61 Beta Rank 57
Alpha -0.11 Alpha Rank 35


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Steve Hach
Senior Editor