SBUX
☕ Starbucks faces concerns about a potential recession impacting consumer spending, coupled with rising coffee prices squeezing margins.
📊 Financial metrics show pressure: EBITDA margins have fallen from 23% pre-COVID to 17%, capex is rising to fuel expansion, and revenue growth has stalled (flat year-over-year).
⚖️ Significant debt, amounting to 20% of its market cap, and a high forward P/E ratio of 30 add to the risks, making the current valuation appear stretched.
@bernardodegarcia:
“I’m also quite concerned about Starbucks. I was about to prepare a video for this weekend about Starbucks and the possible recession looming over it due to coffee prices in general, falling margins, etc., etc. And honestly, the big drop it had surprised me quite a bit. But well, the truth is it’s still there, still with this Brian Nichols rally, we’ll see, we’ll see what happens. If we take a quick look at Starbucks… let’s remove all this and keep only the margins. EBITDA margins went from the upper zone of 23%, COVID hit, then 21%, and now, as we see, they are at 17%. Gross margins follow more or less the exact same curve. Capex as a percentage of revenue, as we see, they are spending more and more capex on revenues to continue with this expansion. Revenues, we are seeing that they are deflating significantly. They still had… Okay, I thought they had negative revenues. No, they had flat revenues year over year, I didn’t remember this. And then there’s the debt issue. You have 20% of your market cap in debt, buddy. Hmm, I don’t know. The Starbucks issue also started to worry me a bit. I think it’s not the first time we’ve talked about it, so well, this drop doesn’t seem very extraordinary to me. It’s still using a forward P/E of 30. It’s kind of the same story as with Nike.”
Watch the exact part of the video where @bernardodegarcia talks about Starbucks here:
Watch the video on YouTube
Read more articles analyzing Starbucks (SBUX) at the following link. SBUX stock.
