Starbucks Stock Analysis Report

With over 28,000 stores spread across the United States, Europe, Middle East, Asia Pacific, and Africa, Starbucks (ticker symbol: SBUX) is the undisputed industry leader with a market capitalization that looks destined to one day hit $100 billion+.

Here are 7 reasons to buy Starbucks stock:

Starbucks Valuation

One year ago, Starbucks share price was higher. Since then Starbucks has opened over 2,000 more store locations, increased revenues by over one billion dollars, and continues to expand its partnerships with companies like Google.

According to Wall Street analysts, the share price is undervalued by about 10%, which compares well to a lot of other big name companies in the S&P 500 that show signs of overvaluation.

Starbucks Dividend

While you wait for Starbucks share price to reflect its true value, you will get paid a dividend of around 2.70% which is nothing to sneeze at these days given where interest rates on bank savings accounts sit.

Starbucks Financials

Key financial metrics for Starbucks are extraordinary when compared to many other brick-and-mortar stores.

Starbucks ROIC is a whopping 29% while its return on equity is an astonishing 92%, suggesting the company has demonstrated exceptional operational efficiency.

Starbucks Moat

Even the most ambitious competitors [McDonald’s, Peet’s, Dunkin Donuts, Philz] can’t come close to knocking Starbucks off its perch as the worldwide coffee leader.

Starbucks has a presence in most continents as well as enviable store locations in desirable neighborhoods and high streets across the world.

Even a well-capitalized competitor cannot quickly catch up to Starbucks thanks to its entrenched store presences in key locations worldwide.

Loyal Customers

Like Coca Cola, which has seen off ambitious competitors over the years, Starbucks has built up a loyal customer base that won’t switch anytime soon.

With its extensive list of brands and varietal combinations, Starbucks simply cannot be displaced easily because customers have learned to love the taste.

If customers do migrate to Starbucks competitors, the change will come slowly. As a result, Starbucks financials are likely to remain stable and predictable for years to come.

Supply Chain

Starbucks has one of the most impressive supply chain networks of any company. Each day it delivers coffee beans, milk, flavorings, and food to over 27,000 stores worldwide.

Even well-capitalized companies won’t be able to jump the high supply chain hurdle any time soon.

Additionally, the Starbucks supply chain machine is a competitive advantage few competitors will come close to matching in the near future.

Revenue Opportunities

Starbucks simply needs to increase pricing on its drinks to boost revenues and profits. And you can bet that the cost of coffee will track inflation increases in coming decades.

Increasingly, Starbucks is getting into the big data game by moving its offline customer base online with a view to monetizing customers even better. Expect its online marketing campaigns to boost customer retention as Starbucks promos are rolled out.

Plus, the steady roll out of ever more store locations globally will continue to increase revenues and profits in coming years.

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.