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Why Starbucks Stock Is Down By 7% Today

·2 minuto per la lettura

Starbucks Stock Falls After Quarterly Report Fails To Meet Traders’ Expectations

Shares of Starbucks gained downside momentum and moved towards the $105 level after the company reported its quarterly results. Starbucks reported revenue of $8.1 billion and adjusted earnings of $1.00 per share, missing analyst estimates on revenue and meeting them on earnings.

The company stated that global comparable store sales increased by 17%, mostly driven by an increase in comparable transactions. It should be noted that China comparable store sales decreased by 7% as both the average ticket and the number of transactions declined.

In fiscal 2022, Starbucks will increase wages for its retail workers. Labor shortage is reported across various industries, so this measure should improve the company’s ability to retain talent.

Starbucks has also announced that it would return $20 billion to shareholders over the next three years, using share repurchases and dividends.

What’s Next For Starbucks Stock?

Earnings estimates for Starbucks have been flat in recent months. Analysts expect that the company will report earnings of $3.73 per share in the current fiscal year and $4.2 per share in the next fiscal year, so the stock is trading at 25 forward P/E for fiscal 2023.

The company’s earnings guidance implies 10% EPS growth from the base of $3.10 per share in fiscal 2021, so Starbucks expects to report earnings of about $3.40 per share in fiscal 2022.

Analyst estimates are higher than the company’s guidance, and the market does not look satisfied with the company’s earnings target. The slowdown in China and wage inflation served as additional negative catalysts for Starbucks stock.

The company’s shares have already declined by more than 15% from the peak that was reached back in July, so the size of the pullback may attract value-oriented players. However, it remains to be seen whether the market believes that current valuation is justified as Starbucks’ growth targets look modest.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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