Starbucks(SBUX -0.47%) is facing some challenging headwinds right now. Stores are unionizing, costs are rising, and its high-priced coffee is starting to look more unaffordable in the midst of inflation. Down 27% year to date, shares of Starbucks have performed slightly worse than the S&P 500's 23% slump.
But how does Starbucks' business look in the longer term, and should you consider buying the stock on the dip today?
More stores, and smaller spaces?
Last month, Starbucks held a biennial Investor Day where it announced many ambitious targets. A couple of the ones that stood out to me were that the coffee chain's plans to open 20,000 more stores, and it's also going to focus more on a variety of smaller formats.
Today, the company has 35,000 stores around the globe and by 2025 it plans to expand that number to 45,000. By 2030, it plans to have 55,000 stores up and running. That's a 57% increase within eight years, which is no small task.
One of the ways Starbucks is going to achieve this without breaking the bank is by utilizing smaller store formats that can help provide customers with more convenience. Starbucks noted that it "sees tremendous opportunity to further diversify and expand formats across cafes, pick up, delivery-only and drive-thru only locations." Those types of locations would make it easier for customers to make mobile orders, which could make the process more efficient. Plus, smaller-store formats would also allow the company to hire fewer staff per location, potentially leading to more profitability.
Data from Placer.ai, a location analytics company, suggests that this could unlock a huge growth opportunity for Starbucks. When looking at the past 12 months, Placer.ai's data found that for Starbucks' smaller locations (e.g., 400 square feet), the company generated 15% more visitors per square meter when compared to its regular-sized locations, which are about 2,000 square feet.
Starbucks didn't specify what kind of split (small versus large) it's looking at with respect to new store openings, but smaller stores would allow more room for the company to expand rapidly while becoming more efficient and profitable along the way.
The company is expecting plenty of growth
Starbucks wasn't shy when posting its projections for the future on Investor Day. From fiscal 2023 to fiscal 2025, it is forecasting global revenue to rise between 10% and 12%. On the high end, that's a tad more than what it averaged between 2010 and 2019, before the pandemic shook up the global economy:
SBUX Revenue (Annual YoY Growth) data by YCharts
However, by rapidly opening more stores and focusing on efficiency, generating up to 12% growth doesn't appear to be all that unlikely for the business. Plus, another growth opportunity that Starbucks is pursuing includes offering more ready-to-drink products, which are available outside of its retail stores. This is another area where Starbucks can expand its portfolio, reach more customers, and increase sales.
Is Starbucks a buy today?
Starbucks is facing some challenges this year and it wouldn't be surprising if the stock were to continue falling as inflation takes its toll on the business. In the longer term, the picture looks much more promising.
If you're willing to buy and hold while the company undergoes what looks to be a significant and meaningful transition, Starbucks could make for a solid investment. The changes it is making to its business to get leaner and more efficient could lead to solid returns in the long haul.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends the following options: short October 2022 $85 calls on Starbucks. The Motley Fool has a disclosure policy.
FAQs
Starbucks is forecast to grow earnings and revenue by 11.2% and 8.3% per annum respectively. EPS is expected to grow by 13.6% per annum. Return on equity is forecast to be -122.9% in 3 years.
What is the stock prediction for Starbucks in 2025? ›
Starbucks stock prediction for 1 year from now: $ 98.36 (11.11%) Starbucks stock forecast for 2025: $ 96.69 (9.65%) Starbucks stock prediction for 2030: $ 153.27 (73.81%)
What is the stock price forecast for Starbucks in 2024? ›
The forecasted Starbucks price at the end of 2024 is $91.98 - and the year to year change -4%.
What will Starbucks look like in the future? ›
Starbucks announced that in the next 10 years, Starbucks' innovation strategy would focus on developing high-end line Reserve Roastery as the center of innovation, bringing customers an extraordinary retail experience in the form of breakthrough innovation.
Is Starbucks a long term investment? ›
Key Points. The Motley Fool recommended Starbucks in 1998; shares have made millionaires since then. Today, the dominant coffee house chain still has a myriad of buttons to push for growth. With the stock at 52-week lows, investors should enjoy strong long-term investment returns.
Would Starbucks be a good investment? ›
Additionally, the dividend at Starbucks is backed by a robust and growing free cash flow. Given the company's history of regular dividend increases and its current yield, Starbucks could be an attractive option for investors seeking income as well as potential capital appreciation.
Is Starbucks a buy sell or hold? ›
Is Starbucks stock a Buy, Sell or Hold? Starbucks stock has received a consensus rating of hold. The average rating score is Baa1 and is based on 44 buy ratings, 52 hold ratings, and 1 sell ratings.
What are analysts saying about Starbucks stock? ›
Based on analysts offering 12 month price targets for SBUX in the last 3 months. The average price target is $104.96 with a high estimate of $127 and a low estimate of $87.
How much money to invest in Starbucks? ›
You often don't need a lot of money to start. Currently, the minimum amount of money you'll need to invest in Starbucks is $500.
What is the SBUX forecast for 2030? ›
For Starbucks stock forecast for 2030, 12 predictions are offered for each month of 2030 with average Starbucks stock forecast of $27.34, a high forecast of $35.44, and a low forecast of $23.41. The average Starbucks stock forecast 2030 represents a -66.95% decrease from the last price of $82.7300033569336.
SBUX Stock Forecast FAQ
Based on analyst ratings, Starbucks's 12-month average price target is $107.30.
What is the Apple stock price prediction for 2028? ›
Apple long term stock forecast is anticipated to be $315 in 2025, $370 in 2026, $425 in 2027, $465 in 2028, and $480 in 2029.
Will Starbucks be successful in the future? ›
Globally, Starbucks expects to approach 45,000 stores by the end of 2025, and is well on track to reach approximately 55,000 stores by 2030, as projected at its 2020 Investor Day. Starbucks now expects global revenue growth in the range of 10% to 12% annually from fiscal 2023 to fiscal 2025.
What is Starbucks biggest threat? ›
Starbucks Threat
1. Competition from other coffee chains and independent coffee shops. Starbucks faces competition from a variety of sources, including other coffee chains and independent coffee shops.
Why invest in Starbucks? ›
It also pays an above-average dividend that should continue rising. These factors position Starbucks to potentially produce total annual returns in the mid-teens, which is a strong return from such a high-quality company. That's why I recently bought some more shares and plan to buy even more in the future.
Does Starbucks have growth potential? ›
Starbucks is ubiquitous but still has sizable growth prospects. By the end of this decade, the leadership team wants to have 55,000 locations open. Even in the U.S., the objective is to get to 20,000 stores eventually.
What is the goal of Starbucks in 2030? ›
2030 Goals
Our vision for the future is to become resource positive. From storing more carbon than we emit, to reducing and conserving more freshwater than we use and eliminating waste, we set targets to cut our climate, water and waste footprints in half by 2030, compared to a FY19 baseline.
Is Starbucks going to grow? ›
Starbucks' earnings over the next few years are expected to increase by 43%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
Is Starbucks growing or declining? ›
Despite its issues in China, Starbucks remains very much in growth mode. It plans to expand its global footprint to 55,000 stores by 2030, with 35,000 of those locations outside of the U.S. At the end of 2023, the company operated 38,587 stores globally and had 20,656 locations outside of North America.
