Starbucks Shares Fall After it Misses Revenue Estimates, But Analysts Optimistic on Outlook

Starbucks shares fell about 2% in post-trading hours on Tuesday after the world’s leading specialty coffee retailer reported lower-than-expected revenue in the fiscal second quarter of 2021, although the coffee chain raised its full-year guidance.

The Seattle-based retailer said its consolidated net revenues rose 11% from the prior year to $6.7 billion, missing Wall Street’s consensus estimates of $6.82 billion.

Following this, Starbucks shares slumped about 2% to $144.16 after trading hours on Tuesday. The stock rose over 8% so far this year.

However, the world’s leading restaurant chains reported non-GAAP earnings per share of $0.62, up from $0.32 in the prior year. That was also higher than the analysts’ expectations of $0.52 per share.

Starbucks raised its forecasts for revenue and profit for the fiscal year 2021 to $28.5 billion-$29.3 billion and non-GAAP EPS in the range of $2.90-$3.00, up from the previous projection of $28.0 billion-$29.0 billion and $2.70-$2.90, respectively.

Analyst Comments

“Bottom line beat driven by exceptional margin performance, while top-line ~ expectations, but underscoring full recovery vs pre-COVID-19. Guidance raised as hoped, but we still see room for upside. Full valuation/high expectations likely keep NT stock reaction in check. Raise price target to $120, maintain Equal-weight,” noted John Glass, equity analyst at Morgan Stanley.

“FY21 guidance was raised for a few key items based on better-operating results, including revenue of $28.5-29.3B vs prior guidance of $28-29B; adj. operating margin of 16.5-17.5% (from 16-17%) which is still expected to lag the sales recovery by two quarters and should reach the longer-term 18-19% target by yearend (our estimate is above this); adj. EPS of $2.90-3.00 from $2.70-2.90 previously (both with 10c from the 53rd week and comparing to our prior estimate of $2.84 and consensus $2.85); and a more favorable tax rate in the low to mid-20%s from mid-20%s prior. Other items including comps, new store openings, capex and interest expense for the year were reiterated.”

Starbucks Stock Price Forecast

Twenty analysts who offered stock ratings for Starbucks in the last three months forecast the average price in 12 months of $121.76 with a high forecast of $137.00 and a low forecast of $104.00.

The average price target represents a 4.83% increase from the last price of $116.15. Of those 20 analysts, 13 rated “Buy”, seven rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley raised the base target price of $120 from $110 with a high of $150 under a bull scenario and $79 under the worst-case scenario. The firm gave an “Equal-weight” rating on the coffee retailer’s stock.

Several other analysts have also updated their stock outlook. CFRA raised the stock price forecast to $125 from $115. Jefferies lifted the target price to $135 from $118. Stifel upped the price objective to $124 from $115.

Moreover, UBS increased the stock price forecast to $118 from $109. Stephens raised the target price to $115 from $100. Oppenheimer lifted the price objective to $135 from $122.

“Raise PT, reiterate Buy. Recovery ongoing in the U.S. and China predicated on a powerful and trusted brand, and we expect the LT framework to prove realistic and drive best-in-class TSR. PT to $135 (from $118) as we shift our multiple to 21.5x our newly introduced’C23E EBITDA of $7.9B, in line with global large-cap growth,” noted Andy Barish, equity analyst at Jefferies.

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