Coffee maker Starbucks Inc. (NASDAQ:SBUX) is scheduled to report its fourth quarter and full year Fiscal 2022 results on November 3, after the market closes. Starbucks’ quarterly performances in 2022 have been marred by persistent inflationary pressures, rising costs of coffee beans, unionization struggles, and the resurgence of COVID-19 cases in China. Year to date, SBUX stock has lost 24.5%.
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The Street expects Starbucks to post an adjusted profit of $0.72 per share in Q4, meaningfully lower than the prior-year period figure of $1.00 per share. Also, the Q4 expectation is below the Q3FY22 adjusted earnings of $0.84 per share.
Meanwhile, revenue is pegged at $8.32 billion, representing a modest 2% jump both year-over-year and sequentially.
Wedbush Analyst’s Expectations from SBUX’s Results
Analyst Nick Setyan of Wedbush has a Hold rating on SBUX stock with a price target of $92, which implies 6.3% upside potential from current levels. Nonetheless, Setyan’s Q4 expectations are slightly above the consensus. He expects adjusted earnings of $0.75 per share on revenue of $8.48 billion.
Setyan’s conservative call on Starbucks stems from the lingering COVID-19 lockdowns and related slow-down in economic growth in China, which remains one of its largest markets outside of the U.S. This, he believes is a medium-to-long-term risk for the coffee house.
Having said that, Setyan noted that Starbucks’ U.S. business remains strong on the heels of “increased traffic and sales levels from the Fall launch, increased traffic from the return to school and continued return-to-office, and continued strength in delivery and mobile orders.” Similarly, international operations (sans China) may continue to bode well in the long term, he added.
Setyan’s price target for Starbucks is based on a Price/Earnings per share (EPS) multiple of 27.1x its FY23 EPS estimate. This is roughly in line with its 5-year pre-COVID median forward P/E multiple of 27.3x. Starbucks is currently trading at a P/E of 24.5x.
What is the Price Target for Starbucks Stock?
On TipRanks, the average Starbucks price target is $98.55, which implies 13.8% upside potential to current levels. Also, analysts have a Moderate Buy consensus rating on SBUX stock based on 11 Buys and 13 Holds.
Key Takeaways
The current uncertain macroeconomic backdrop continues to hamper companies across sectors. However, Starbucks’ customers are not cost-conscious, and the coffee house may be able to pass on costs to customers in the near term to wriggle through tough times. Also, analysts are cautiously optimistic about the stock’s trajectory. Notably, investors may wait out the final quarter’s details to make further investment decisions.
