In addition to awaiting quarterly reports from several of the Mag 7 big tech companies next week, Wall Street will be anticipating Starbucks SBUX results for its fiscal second quarter on Tuesday, April 29.
Leading up to its Q2 report, investors are certainly hoping Starbucks stock can continue to rebound, with SBUX still down 10% year to date and 28% from its 52-week high of $117 a share.
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Starbucks Q2 Preview & Expectations
Notably, Wall Street will be monitoring the effects that higher tariffs will have on Starbucks as the specialty coffee retailer has already been dealing with slower global same-store sales, particularly in China. Starbucks Q2 sales are expected to come in at $8.79 billion, a 2% increase from $8.56 billion in the comparative quarter. Optimistically, Starbucks’ international revenue is thought to have risen 5% to $1.84 billion compared to $1.75 billion in the prior period.
That said, Starbucks is expected to see a noticeable decrease on its bottom line with Q2 EPS projections at $0.49 versus $0.68 per share a year ago. Starbucks most recently beat its Q1 EPS expectations by 4% but has posted an average earnings surprise of -2.34% over the last four quarters.
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Starbucks’ Stagnant Price Performance
Although Starbucks stock has been known to post pleasant gains in the past, it’s noteworthy that SBUX is down 24% in the last two years and is only sitting on +11% gains in the last three years, which has lagged the broader index’s returns of more than +30%.
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SBUX Valuation Comparison
What may be catching long-term investors’ attention is that Starbucks stock is trading at 28.6X forward earnings, which is on par with its decade-long median and well below the high of 95.8X during this period. Plus, SBUX isn’t at an overly stretched premium to the benchmark S&P 500’s 21.2X forward earnings multiple and its Zacks Retail-Restaurants Industry average of 26.2X.
Companies ride the wave of AI for enhanced efficiency and superior quality, a groundbreaking ISG Provider Lens™ report highlights
Amidst the rapid evolution of artificial intelligence and cloud technologies, U.S. enterprises have undergone a metamorphosis in their approach to application development and management (ADM) strategies as per the latest research published by Information Services Group (ISG) III, a prominent global technology research and advisory firm.
Entrenched in a quest for cost optimization, U.S. companies have embraced AI technologies throughout the lifecycles of applications, catapulting the adoption of generative AI (GenAI) in early developmental stages, asserts the 2024 ISG Provider Lens™ Next-Gen ADM Services report for the U.S.
Leveraging AI tools has led to the automation of ADM tasks, resulting in enhanced software quality, minimized downtime, and boosted efficiency, as outlined in the report. This automation journey contributes to heightened developer productivity, reduced time to market, and proactive maintenance practices.
Prioritizing quality assurance, U.S. enterprises are exploring GenAI's potential applications in this realm. By automating test creation and scenario simulation, GenAI accelerates testing processes, uncovering discrepancies that might elude manual inspections. Companies tread cautiously, endeavoring to embed quality assurance mechanisms in GenAI to ensure ethical and optimal functionality.
A notable trend sees an increasing number of U.S. enterprises consolidating applications and underlying IT infrastructure engagements, enwrapping servers, networks, and cloud services, heralding optimized performance, scalability, security, and cost-efficiency, discloses the report.
Enterprises are gravitating towards major public cloud platforms for robust, scalable, and flexible applications, facilitated by orchestration tools like Kubernetes, microservices architectures, containerization, and DevOps methodologies. This strategic shift to the cloud harmonizes with market dynamics, enabling enterprises to pivot swiftly in response to evolving customer needs.
Fusion of site reliability engineering (SRE) with AI for IT operations (AIOps) heralds a new epoch in ADM operations, affirms the report. This blend harnesses machine learning and advanced analytics to navigate vast operational datasets, empowering companies with holistic insights into system performance and the ability to preemptively address potential glitches for seamless service delivery.
The report delves into additional ADM trends in the U.S., spotlighting providers' adeptness in catering to industry-specific demands, and the ascendancy of Agile and DevOps practices in continuous testing services, underpinning a narrative of ongoing evolution and adaptability in the technology sphere.
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Conclusion & Final Thoughts
At the moment, Starbucks stock lands a Zacks Rank #3 (Hold). While the iconic coffee chain is expected to experience a resurgence in profitability next year, it may be too soon to say it’s time to buy SBUX for an extended rebound.
More meaningful upside will largely depend on Starbucks’ being able to reach or exceed its Q2 expectations and, most importantly, offering guidance that starts to reconfirm a return to growth.
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This article originally published on Zacks Investment Research (zacks.com).