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STARBUCKS - Should We Buy Now?

|Includes: Starbucks Corporation (SBUX)

The recent Brits premiere exit may have created opportunity for the many in the stock market. The markets did reflect the news and reacted with fear.

My reason for cwriting this article is the looking for some strong comaony to add to my profolio. I wont be boring you with a lot of reading but briefly go over Sbux as a business and its number make the company a buy.

Some strategic moves:

Nespresso partnership = serve Eoru market

Pepsico Partnership = new bottled cold brew

Annheuser busch = bottled teavana distribution around 2017

stabucks+Tingyi = serve products in China

Some Major Expenses 2016:

Lease 1032 B

2106 note due $400 M

Amortization Expense 744 M

Capex 1.4 B

2016 Expected Expansion total 1800 stores

US 900

China 700

Other 200

What does SBUX sell?

-Purchase and roast chigh qulaity coffee.

-sell hand crafted coffee, tea and fresh food, snacks etc.

Useful data on stores

Company Operated stores   Licensed Stores  
             
US 7559 71%   US 4962 71%
Canada 1009 9%   South Korea 831 12%
Japan 1073 10%   UK 414 6%
China 1026 10%   China 785 11%
  10667 100%     6992 100%

Sbux has stores in 68 countries.

As I had mentioned I will keep my article short and focus more on data and numbers to show for Sbux to be a strong potential candidate.

SBUX as a business I always equate it to Apple. The reason for this is Sbux is a speciality coffee business and provides premium quality products. Seriouly, their sumer drink Mango passion black lemonade tea. Have you had that drink awesome!! But for someone like me frugal with money pricey! Yet I was blown away for a fact that Tim Hortons, Dunkin donuts or even Macdonalds could not come close to these drinks.

Sbux = Apple = Faithful,devoted crowd seek quality product with a unique environtment at any of its stores.

Its as if you are either a Mac user or Windows user. Sbux has made the distinction, its customers are different and love the quality products.

Any ways back to data

sales:

  2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E Q1 '16 Q2 '16
Revenue 7998 8771 8180 8963 9632 10534 11793 12977 15197 21000 4210 8164
Growth %   10% -7% 10% 7% 9% 12% 10% 17% 38%    
Net Income 390 315 672 945 1245 1383 8.3 2068 2757 2808.54 687 1262
Shares 770 741 745 744 748 754 1524 1526 1513 1486 1503 1495
Stock Price 26.68 14.69 17.7 24.85 40.09 45.28 71.29 77.68 57.93 56.99    
EPS 0.9 0.43 0.53 1.24 1.62 1.79 0.01 1.37 1.84 1.89 0.46 0.84
P/E 30 34 33 20 25 25 7129 57 31 30    

*** Ignore 2013 moslty noise from a litigation.

"EPS for fiscal 2013 decreased to $0.01, compared to EPS of $1.79 in fiscal 2012. The decline was due to the litigation charge noted below. Arbitration concluded on litigation with Kraft Foods Global, Inc. ("Kraft") on November 12, 2013, which resulted in a pretax charge to fiscal 2013 operating results of $2.8 billion. This charge reduced EPS by $2.25 per share in fiscal 2013".

Overall

healthy growth rate of 11.8% and company solid

share repurshcase plan FY16 100M. 23M already purchased of the 50M planned last year.

Approximately 1,800 net new store openings in the fiscal year: ◦

Americas: approximately 700, half licensed

China/Asia Pacific: approximately 900 two-thirds licensed

EMEA: approximately 200, primarily licensed

Stores opened data

2016 Q1 Q2  
America 171 132  
Asia/Pacific 281 175  
EMEA 79 47  
other -3 -4  
Q1+Q2 528 350 878
2016Total 23921

2015Total

23043
change 878
   
Expected stores 2016 1800
opened 878
change left to open 922

I like the fact that Sbux is quiet agressive in opening their stores with 922 stores left to open and we have still 2 quarters to go.

For any business to grow ofcourse expansion is key. Sbux is focused on its biggest markets Americas (US) and Asia(China). These markets are the largest contributors to its revenues. And also the markets where the company is focused on opening the 1600 new stores (200 new stores in EMEA).

If Sbux as planned opens stores as planned focussing on US and China with current growth rate appox numbers below for revenue:

My Estimates for Revenue

2015A US China EMEA
Revenue by region 13293 2395 1216
Existing Stores 7554 1811 305
Per Store revnue 1.76 1.32 3.99
2016E US China EMEA Total
New Stores to add 900 700 200  
per store rev 1.76 1.32 3.99  
Estimated '16 rev 1584 926 797 3307
Now lets put everything together      
         
Regions 2015A 2016E Total  
Revenue Existing Est. New Rev    
US 13293 1584 14877 66%
Asia 2395 926 3321 15%
EMEA 1216 797 2013 9%
CD**1 1730 1730 1730 8%
Other**2 525 525 525 2%
  19159 5562 22466 100%
Note 1&2: for CD and other I have used the 2015 values.  

CD - Channel Development

Other - fresh foods, snacks, distribution of starbucks products with partnerships etc.

  2015A 2016E
Revenue 19159 22466
Expenses 14854 14854
  4305 7612
capex 1400 1400
  2905 6212
Taxes 35% 1017 2174
Net 1888 4038
shares 1513 1486
Approx Per share EPS 1.25 2.72

Again these are only approximates and quick way to look at the company potential which I came up with while sitting at SBUX and drinking the Mango Passion Black The recent Brits premiere exit may have created opportunity for the many in the stock market. The markets did reflect the news and reacted with fear.

My reason for cwriting this article is the looking for some strong comaony to add to my profolio. I wont be boring you with a lot of reading but briefly go over Sbux as a business and its number make the company a buy.

Some strategic moves:

Nespresso partnership = serve Eoru market

Pepsico Partnership = new bottled cold brew

Annheuser busch = bottled teavana distribution around 2017

stabucks+Tingyi = serve products in China

Some Major Expenses 2016:

Lease 1032 B

2106 note due $400 M

Amortizatio Expense 744 M

Capex 1.4 B

2016 Expected Expansion total 1800 stores

US 900

China 700

Other 200

What does SBUX sell?

-Purchase and roast chigh qulaity coffee.

-sell hand crafted coffee, tea and fresh food, snacks etc.

Useful data on stores

Company Operated stores   Licensed Stores  
             
US 7559 71%   US 4962 71%
Canada 1009 9%   South Korea 831 12%
Japan 1073 10%   UK 414 6%
China 1026 10%   China 785 11%
  10667 100%     6992 100%

Sbux has stores in 68 countries.

As I had mentioned I will keep my article short and focus more on data and numbers to show for Sbux to be a strong potential candidate.

Sbix as a business I always equate it to Apple. The reason for this is Sbux is a speciality coffee business and provides premium quality products. Seriouly, their sumer drink Mango passion black lemonade tea. Have you had that drink awesome!! but for someone like me frugal with money pricey. Yet I was blown away for a fact that Tim Hortons, Dunkin donuts or even Macdonalds could not come close to these drinks.

Sbux = Apple = Faithful,devoted crowd seek quality product with a unique environtment in any of thier stores.

Its as if you are either a Mac user or Windows user. Sbux has made the distinction, its customers are different and love the quality products.

Any ways back to data

sales

  2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E Q1 '16 Q2 '16
Revenue 7998 8771 8180 8963 9632 10534 11793 12977 15197 21000 4210 8164
Growth %   10% -7% 10% 7% 9% 12% 10% 17% 38%    
Net Income 390 315 672 945 1245 1383 8.3 2068 2757 2808.54 687 1262
Shares 770 741 745 744 748 754 1524 1526 1513 1486 1503 1495
Stock Price 26.68 14.69 17.7 24.85 40.09 45.28 71.29 77.68 57.93 56.99    
EPS 0.9 0.43 0.53 1.24 1.62 1.79 0.01 1.37 1.84 1.89 0.46 0.84
P/E 30 34 33 20 25 25 7129 57 31 30    

*** Ignore 2013 moslty noise from a litigation.

"EPS for fiscal 2013 decreased to $0.01, compared to EPS of $1.79 in fiscal 2012. The decline was due to the litigation charge noted below. Arbitration concluded on litigation with Kraft Foods Global, Inc. ("Kraft") on November 12, 2013, which resulted in a pretax charge to fiscal 2013 operating results of $2.8 billion. This charge reduced EPS by $2.25 per share in fiscal 2013".

Overall

healthy growth rate of 11.8% and company solid

share repurshcase plan FY16 100M

Approximately 1,800 net new store openings in the fiscal year: ◦

Americas: approximately 700, half licensed

China/Asia Pacific: approximately 900 two-thirds licensed

EMEA: approximately 200, primarily licensed

Stores opened data

2016 Q1 Q2  
America 171 132  
Asia/Pacific 281 175  
EMEA 79 47  
other -3 -4  
Q1+Q2 528 350 878
2016Total 23921

2015Total

23043
change 878
   
Expected stores 2016 1800
opened 878
change left to open 922

I like the fact that Sbux is quiet agressive in opening their stores with 922 stores left to open and we have still 2 quarters to go.

For any business to grow ofcourse expansion is key. Sbux is focused on its biggest markets Americas (US) and Asia(China). These markets are the largest contributors to its revenues. And als othe markets were its focused on opening the 1600 new stores (200 new stores in EMEA).

If Sbux as planned opens stores as planned focussing on US and China with current growth rate appox numbers below for revenue:

My Estimates for Revenue

2015A US China EMEA
Revenue by region 13293 2395 1216
Existing Stores 7554 1811 305
Per Store revnue 1.76 1.32 3.99
2016E US China EMEA Total
New Stores to add 900 700 200  
per store rev 1.76 1.32 3.99  
Estimated '16 rev 1584 926 797 3307
Now lets put everything together      
         
Regions 2015A 2016E Total  
Revenue Existing Est. New Rev    
US 13293 1584 14877 66%
Asia 2395 926 3321 15%
EMEA 1216 797 2013 9%
CD**1 1730 1730 1730 8%
Other**2 525 525 525 2%
  19159 5562 22466 100%
Note 1&2: for CD and other I have used the 2015 values.  
  2015A 2016E
Revenue 19159 22466
Expenses 14854 14854
  4305 7612
capex 1400 1400
  2905 6212
Taxes 35% 1017 2174
Net 1888 4038
shares 1513 1486
Approx Per share EPS 1.25 2.72

Again these are only approximates and quick way to look at the company potetial which I came up with while sitting at SBUX and drinking Mango Passion Black lemonade tea LOL!!!

I am not accounting for any non cash expenditures, share buy back 23M etc.

These would be a good platform for other investors to use make their own adjusments.

Ok Now Some Technicals:

SBUX Technicals

SBUX Price vs Price of all S&P Constitutents

Ok thankyou to stockcharts for their amazing charts love the website. Kindly allow us to downlad charts for free.

So looking at technicals sort of a double top and in a trading range. Yes this does concern me. But looking at price objective risk we might see a fall to 50ish. I would buy even more as the company can post solid numbers with its new stores online and the other half online by the end of 2016.

Also the technicals speak a wide gap in 200 vs 40 MA's. SBUX is well above the MA's.

RSI still within the overbought range. The stock is still Strong and rising.

In chart1 although some concerns but the formation last white candle is a positive strenght from the buyers side.

I have included chart2 so we can compare SBUX price vs the price of all the S&P constituents. We notice no divergence of any kind but towards rise. Although a slight dip which is due the recent Brit event that affected the entire market overall.

PS I would apreciate in any inputs from other investors so I can improve my analysis. Thank you.

Disclosure: I am/we are long SBUX. Bought on Jun 27/2016 @ $54.50

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclosure: I am/we are long SBUX.