Bear of the Day: Starbucks (SBUX)

Starbucks Company Overview Zacks Rank #5 (Strong Sell) stock Starbucks (SBUX) is the top roaster and retailer of specialty coffee worldwide. In addition to its fresh, rich-brewed coffees, Starbucks also sells premium teas, breakfast sandwiches, juices, and other snacks through its more than 38,000 cafes globally. Beyond its heavy retail presence, the company also generates revenues through licensed stores, consumer packaged goods, single-serve coffee products, and read-to-drink items sold in grocery stores and warehouse clubs like Costco (COST).Starbuck’s Sales Slow Despite Strong EconomyReduced consumer traffic during fiscal 2024 has negatively impacted comparable store sales. The company’s North America segment declined 2%, international declined 2%, and China plummeted 8%, year-over-year. Starbucks faces three major, difficult-to-reverse hurdles in the future, which include:·       Waning Consumer Interest: SBUX was once the hot and hip “go-to” place for people to grab a coffee. However, as time has passed, the company has lost the benefit of being new and hip.·       Health Concerns: More Americans are waking up to the obesity epidemic and the causes behind it. Unfortunately for Starbucks, many of the company’s highest-margin drinks are packed with sugar. As citizens become more health conscious, SBUX sales should be negatively impacted.·       Increased Competition: Starbucks has already largely saturated most major global markets. In addition, increased competition may eat into existing locations.Negative Earnings GrowthThe company anticipates stubborn headwinds to persist with challenging consumer environments in the Middle East, South East Asia, and parts of Europe. To make matters worse, the company’s adjusted margins declined due to increased marketing expenses, macro challenges, and an increase in benefit-related spending. Zacks Consensus Earnings Estimates suggest that SBUX EPS will see negative growth for the current quarter, next quarter, and full-year 2025 periods.Image Source: Zacks Investment ResearchRelative Price WeaknessThe SBUX share price mimics the fundamentals and should be a red flag for investors interested in outperforming the market. SBUX shares have dramatically underperformed the market over the past five years, gaining a minuscule 1.6% versus the S&P 500’s 90% gains over the same timeframe.Image Source: Zacks Investment ResearchBottom LineDespite its global dominance, Starbucks faces significant headwinds. Declining consumer interest, health concerns surrounding sugary drinks, and increased competition adversely impact earnings growth.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Starbucks Corporation (SBUX): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks