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Starbucks Corp SBUX

Morningstar Rating
$85.17 +0.25 (0.29%)
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Company Report

Biggest Restaurant Brands Set To Gain Market Share as Industry Navigates Tough Environment

As we gear up for the release of first-quarter earnings, our top picks in the restaurant industry remain wide-moat McDonald's and wide-moat Starbucks, trading at 14% and 19% discounts to our $312 and $105 fair value estimates, respectively. While industry traffic has been depressed for two years, both brands boast strong digital platforms that allow them to defend transaction frequency without indiscriminate national discounting, and both benefit from scale-driven cost advantages that should allow them to meet the needs of the increasingly value-sensitive consumer without sacrificing financial performance. These are the two most important factors, in our view, that will distinguish the best and worst performers in our industry coverage over the coming years. The industry looks fairly priced in aggregate, trading at a 3% premium to our market-cap weighted fair value estimates. The aggregate figure masks a very bimodal return distribution: Brands like narrow-moat Wingstop (up 108% annually) and wide-moat Chipotle (74%)—which boast strong unit economics and have taken material industry transaction share—have materially outperformed brands like no-moat Wendy's (down 9%) and narrow-moat Papa John's (down 17%), which have not. Those top-performing brands are fully priced, trading at material premiums to our intrinsic valuation (163% and 52%, respectively), suggestive of meaningful execution risk.

Price vs Fair Value

SBUX is trading at a 19% discount.
Price
$85.17
Fair Value
$324.00
Uncertainty
Medium
1-Star Price
$893.32
5-Star Price
$95.70
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Starbucks’ "connect" initiative should drive continued adoption of the firm’s loyalty program, materially increasing customer lifetime value and helping drive new user acquisition.

Bears

Intense competition for suburban drive-thru sites could pinch margins, with domestic new unit openings skewing heavily toward those footprints.

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News

Trading Information

Previous Close Price
$84.92
Day Range
$84.9286.37
52-Week Range
$84.29115.48
Bid/Ask
$84.96 / $85.28
Market Cap
$96.43 Bil
Volume/Avg
34 / 7.9 Mil

Key Statistics

Price/Earnings (Normalized)
23.23
Price/Sales
2.69
Dividend Yield (Trailing)
2.53%
Dividend Yield (Forward)
2.62%
Total Yield
4.46%

Company Profile

Starbucks is one of the most widely recognized restaurant brands in the world, operating more than 38,000 stores across more than 80 countries as of the end of fiscal 2023. The firm operates in three segments: North America, international markets, and channel development (grocery and ready-to-drink beverage). The coffee chain generates revenue from company-operated stores, royalties, sales of equipment and products to license partners, ready-to-drink beverages, packaged coffee sales, and single-serve products.
Sector
Consumer Cyclical
Industry
Restaurants
Stock Style Box
Large Core
Total Number of Employees
381,000

Competitors

Valuation

Metric
SBUX
QSR
YUM
Price/Earnings (Normalized)
23.2322.6926.62
Price/Book Value
8.15
Price/Sales
2.694.775.52
Price/Cash Flow
13.2221.4523.05
Price/Earnings
SBUX
QSR
YUM

Financial Strength

Metric
SBUX
QSR
YUM
Quick Ratio
0.480.880.99
Current Ratio
0.701.011.26
Interest Coverage
10.893.374.54
Quick Ratio
SBUX
QSR
YUM

Profitability

Metric
SBUX
QSR
YUM
Return on Assets (Normalized)
15.51%6.44%24.79%
Return on Equity (Normalized)
54.01%
Return on Invested Capital (Normalized)
30.26%9.94%55.35%
Return on Assets
SBUX
QSR
YUM
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Restaurants Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
MCD
McDonald's CorpDlsbxwnyPhtl$192.0 Bil
CMG
Chipotle Mexican Grill IncTwpqkxsmqLsvyx$81.3 Bil
CMPGY
Compass Group PLC ADRTcknmkgQjflty$46.2 Bil
YUM
Yum Brands IncDhwzfbmqtQzdjc$38.8 Bil
QSR
Restaurant Brands International IncDschkrlGvcnd$22.1 Bil
DRI
Darden Restaurants IncBkljbydhGjbry$18.4 Bil
DPZ
Domino's Pizza IncLwldkvdzndJvmyn$17.0 Bil
YUMC
Yum China Holdings IncLzdjssgSxjw$14.8 Bil
WING
Wingstop IncPmqgqwgcGtdqmg$10.5 Bil

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