Starbucks Expects Strong Earnings Ahead in 2021, SBUX Stock Jumps 4%

UTC by Bhushan Akolkar · 3 min read
Starbucks Expects Strong Earnings Ahead in 2021, SBUX Stock Jumps 4%
Photo: Pixabay

As the world prepares for the COVID-19 vaccine distribution, Starbucks is expecting faster growth in 2021 and the start of fiscal 2020. The company is also reworking its strategy for new locations.

Retail coffee giant Starbucks Corporation (NASDAQ: SBUX) is getting back on track as it projects a strong rebound by the year 2022. Starbucks CFO Pat Grismer has reiterated his forecast for the adjusted earnings per share from $2.70 to $2.90. By the beginning of fiscal 2022 i.e. October next year, the company is expecting growth over 20%.

The recent growth forecast comes as the world starts preparing for the distribution of the COVID-19 vaccine. With lockdowns initiated in major parts of the U.S. and Europe, Starbucks had a tough time this year. It looks like things have started rolling back to normal this year.

The company has also started projecting its long-term growth targets for 2023-2024. By this time, the company is looking at the adjusted earnings per share growth of 10-12%. Over the extended trading session on Wednesday, December 9, the shares of Starbucks (SBUX) jumped over 3%. At the time of writing, in the pre-market, the stock is 4.97% up, trading at $104.49.

The SBUX share has recovered all losses from the March 2020 market crash and is trading over 10% year-to-date. The company executives have also shared details of their strategy for long-term growth. Starbucks is doubling down on its new cold drinks and plans to use artificial intelligence for its drive-through lanes.

Besides, Starbucks is also working on some restructuring with its location. The company is building a new store format and closing nearly 800 underperforming locations in the U.S. “Based on how customers respond to these new formats, in terms of visitation and frequency, we’ll harness our extraordinary data analytics to learn as we go,” COO Roz Brewer said.

Besides, Starbucks is also reworking its plans in China, its second-biggest market. It is working on new location growth in low-teens against its previous outlook in mid-teens.

Analysts Share Mixed Opinion on Starbucks (SBUX) Stock amid Good Earnings Forecasts

As we said, Starbucks (SBUX) stock is already trading over 10% from its pre-COVID levels. Speaking to CNBC, Mark Newton, founder of Newton Advisors said that he’s bullish on the short-term but warns against any long-term bets.

“The stock does have a lot of near-term momentum. That is certainly a good thing. However, when looking out three to six months or longer, I don’t view the stock as really all that attractive of a risk reward at this level,” said Newton.

While checking its relative strength indicator (RSI), Newton said that the SBUX stock is in overbought territory. On the other hand, Steve Chiavarone, portfolio manager at Federated Hermes, is bullish for Starbucks for 2021. He said:

“We’re big fans of the consumer, and we think that the consumer is going to surprise to the upside next year. Disposable income is 5% higher than it was a year ago, the savings rate is at multidecade highs and consumers are sitting on roughly a $1.5 trillion of excess savings, and we think that the vaccine is kind of a ‘GIs returning home from World War II’ type moment where we’re all going to want to go places we can’t go today, do things we can’t do today”.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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