Starbucks (NASDAQ:SBUX) The stock kind of stinks this week. Investors reacted to the company’s earnings report on Tuesday (sales down 2% and earnings down 14% year-over-year) with a 16% sell-off on Wednesday, and Starbucks stock hasn’t recovered yet – but it could.
On Wednesday, BTIG analyst Peter Saleh argued that Starbucks shares, which cost about $75 today, will return to $100 later this year.
Is Starbucks Stock a Buy in 2024?
Starbucks experienced its “weakest quarter in recent history,” Saleh admits. But the brand remains intact, is popular with its customers, and Starbucks has no competitor anywhere near its size. These factors mean Starbucks stock is still a buy, according to the analyst.
But is he right about that?
At $75 per share, Starbucks is trading at 20.5 times trailing earnings, which sounds cheap, and Is Historically cheap. Data from S&P Global Market Intelligence shows that Starbucks stock had an average P/E ratio of almost exactly 45 from 2001 to 2020. This means that the stock costs less than today half what it has cost in the past – a convincing argument for buying Starbucks shares.
Admittedly, the short-term picture doesn’t look particularly rosy. Starbucks CEO Laxman Narasimhan warned this week that profits in 2024 could be all but “flat” compared to 2023, and would only grow in the low single digits even in the best-case scenario. At a P/E ratio of 20, that seems pretty expensive.
However, Narasimhan has laid out a plan to turn around the business and told investors that he expects to start seeing results before the end of 2024. If he can pull off the turnaround, and Starbucks actually falls back to $100, the stock’s down price today will look like an incredible bargain.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool has a disclosure policy.
Will Starbucks stock go back to $100? 1 Wall Street analyst believes this was originally published by The Motley Fool