Starbucks Facing Headwinds: Recession and Margin Squeeze
☕ 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.
Starbucks Feeling the Heat: Margins Squeezed, Debt Rising
📉 Starbucks faces pressure from falling margins, with EBITDA margins dropping significantly from pre-COVID levels (23% down to 17%).
☕ Revenue growth has stalled (flat year-over-year), while capital expenditures are increasing to fuel expansion efforts.
💳 Rising debt levels, now representing about 20% of the company's market cap, add another layer of concern to the investment thesis.
Starbucks: Is This Warren Buffett’s Next Investment?
☕ Starbucks' predictable business model and strong brand make it attractive for value investors.
📈 The company has demonstrated consistent profit growth over the past 15 years.
🔮 Future growth is estimated at 15% annually, aligning with company projections.
✅ According to Warren Buffett's mentor, the stock is currently trading below its intrinsic value.
