Starbucks Stock Price Plunge Amid Lower Guidance

Starbucks (NASDAQ: SBUX) stock price plunged from an all-time high of $99 following lower earnings guidance. Its stock price rallied sharply by 40% this year before the latest selloff. Its shares are currently trading around $88 a share.

SBUX Starbucks Corporation daily Stock Chart

Starbucks stock price selloff is supported by SEC inquiry and lower earnings guidance for the full year.

The company expects its full-year earnings per share to stand in the range of $2.80 to $2.82. The analysts’ consensus estimate for earnings is around $2.82 per share. The earnings guidance represents a growth of high single-digit – which is down from its ongoing growth model of +10%.

The impact of earnings is likely to be short-term. This is because Starbucks has been generating robust operational and revenue growth performance over the past few quarters. Its strategy of ramping up innovations is also working.

The company is on a path where we now are accelerating the pace of innovation in ways we believe are relevant to our customers, inspiring to our partners and they’re certainly meaningful to our business,” CEO Kevin Johnson said.

SBUX has generated same-store sales growth of 8% Y/Y in the United States in the latest quarter. Its year over year same-store sales growth stood at 6% in China in Q3. The market pundits believe robust growth is driven by menu and digital innovation.

The company’s strategy of opening new restaurants is adding to revenue growth. It has opened 442 net new stores in the latest quarter. The total store count hit 30,626 stores at the end of the quarter.

Its dividends are safe. The company returned $581 million in the form of dividends and share buybacks in the latest quarter. It currently offers a quarterly dividend of $0.36 per share, yielding around 1.63%. Investors are expecting double-digit growth in dividend for the following quarters. Overall, Starbucks stock price is likely to bounce back amid the potential growth in revenues.

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siraj sarwar

Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.
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