Starbucks Stock Is Hitting New Highs -- and Getting Pricey
By Charley Blaine
Investing.com - Starbucks (NASDAQ:SBUX) shares are looking more expensive by the day.
The shares for the king of coffee boutiques hit a 52-week high of $73.25 soon after Wednesday's open, but were promptly pulled lower by the overall market slump. Still, Wednesday was the fifth new high for Starbucks in the last six trading days.
The shares are up 13% on the year. And despite falling 12.4% during the November-December slump, the shares ended the fourth quarter up more than 13%. They’re up 54% from a 52-week low of $47.37 reached last June.
The question of priciness is raised because of all those new highs. One result is that Starbucks is trading at 28x trailing 12-month earnings. The Nasdaq's trailing P/E ratio is 23.5x earnings. The S&P 500 is trading at 21.5x earnings.
The stock's gains may not be justified. Same-store sales in the United States were up just 4% in 2018 and basically flat in China, where the company sees the bulk of future growth, the company's fourth-quarter earnings report said.
The company sees comparable sales growth of 4% for 2019, even with a deal to sell coffee products to Nestle.
The company had 29,865 outlets worldwide at the end of 2018 and expects to add 2,100 this year, with more than 600 each in the United States and China.
The guidance seems to assume the global economy continues to grow steadily and that the current trade dispute between the United States and China doesn't affect sales in China.
The consensus estimate on the stock, according to analysts polled by Investing.com, is $69.40, 4.6% below the current price of $72.73. It happens that Wedbush analyst Nick Setya did raise his estimate on the stock on Wednesday by $4 to $70, still below the current price. The value is baked into the price, he wrote, according to Barron's.
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