Starbucks Q1 Earnings Remain Lukewarm as Covid Weighs on Sales

Shares in Seattle-based coffee chain Starbucks Corporation (SBUX) remain relatively unchanged in extended-hours trading Tuesday after the company reported a mixed quarterly report.

The beverages giant posted a fiscal first quarter (Q1) profit of 61 cents per share, topping analysts’ consensus of 55 cents a share. Meanwhile, revenues for the period tallied $6.75 billion, falling shy of the $6.93 billion figure Wall Street had expected. The company saw a 5% slump in global same-store sales, although comparable store sales in China jumped 5% as the world’s second-largest economy continued to claw back from the health crisis. On a year-over-year (YoY) basis, the firm saw its top- and bottom-line shrink 5% and 23%, respectively.

Despite the company recording 19% fewer transactions during the quarter, the average ticket spend jumped 17%. Additionally, active customers in the past three months grew by 15%, while mobile orders remained comfortably above pre-pandemic levels.

As of Jan. 27, 2021, Starbucks stock has a market capitalization of $123.25 billion, offers a 1.74% dividend yield, and trades 2% lower since the start of the year. However, in the past three months, the shares have gained around 16%. From a valuation standpoint, the stock trades at 36 times 2021 projected earnings, above its average five-year multiple of 27 times.

Wall Street View

This month, Goldman Sachs initiated coverage of the stock with a ‘Buy’ rating and set a $115 price target – indicating a 9.8% premium from Tuesday’s close of $104.69. The bank’s analyst Jared Garber says the coffee chain sits well-positioned to benefit from the economic re-opening in 2021 as consumers revert to urban centers for work and study. The Starbucks verdict is out among other research analysts. The stock receives 14 ‘Buy’ ratings, 2 ‘Overweight’ ratings, and 18 ‘Hold’ recommendations. Traders shouldn’t expect a significant change in brokerage coverage until the outlook becomes clearer later this year.

Technical Outlook and Trading Tactics

Starbucks’ shares climbed above their previous all-time in early December but have traded mostly sideways since. Providing price continues to hold above the July 2019 high, look for the stock to grind higher as investors factor in demand picking up after the vaccine rollout. Active traders who buy here should protect capital with a stop-loss order placed somewhere below the psychological $100 support level. Consider using the measured move technique to set a profit target. To do this, measure the most recent leg higher in dollars and add that amount to the breakout level. For example, add $22.60 to $100 for a profit target of $122.60.

For a look at today’s earnings schedule, check out our earnings calendar.