Shares of Starbucks (SBUX) have been on a downward slope since late 2015. Can Starbucks ever get back its premium valuation?
In the past I have been bullish on shares of Starbucks. I thought Starbucks' success hadn't been reflected in its share price, but it seems investors really don't want to give the stock a premium valuation.
Last Thursday, Starbucks reported fourth-quarter fiscal 2016 results. The company said it earned 56 cents per share, one cent better than the consensus estimate. Revenue rose 16.2% to $5.71 billion, vs. the $5.69 billion estimate.
Jim Cramer, TheStreet's founder and manager of the Action Alerts PLUS portfolio, wrote to Action Alerts PLUS subscribers on Friday that Starbucks had "much-better-than-feared results." Still, Cramer and Research Director Jack Mohr downgraded the stock's rating, even though they like the company. They said that "the trend of 'staying at home' has clearly trickled down and hit even the best of the bunch, Starbucks."
U.S. comparable-store sales rose 4%, comprised of a 6% increase in the average ticket and a 1% decrease in traffic.
Management cut guidance for fiscal 2017. The company said it sees earnings between $2.12 and $2.14 and revenue growth in the double digits. Revenue guidance was slightly higher than the consensus estimate of 8% revenue growth. Management is planning to add approximately 2,100 net new stores globally. Over 70% of its new stores will be located outside the U.S., especially in China, Russia and India. It wants to double the number of stores in China from the current 2,400 to over 5,000 by 2021.