Should You Buy Starbucks Stock While It's Down 41% From Its All-Time High?

Core Insights - Starbucks is experiencing significant challenges, with shares down over 41% from their all-time high nearly three years ago, raising concerns about the sustainability of its growth [1] - The company reported a 4% decline in global comparable-store sales and a 6% drop in transactions during the fiscal second quarter, marking the worst performance since the global financial crisis [2] - Despite these challenges, Starbucks remains profitable and has strategic flexibility to recover, with management optimistic about future conditions and product innovation [4] Financial Performance - The adjusted global operating margin for the second quarter fell to 12.8% from 14.2% a year earlier, and adjusted earnings per share (EPS) decreased by 7% to $0.68 [3] - Full-year guidance indicates a low-single-digit decline to flat growth in comparable-store sales for 2024, a downward revision from a previous target of 4% to 6% growth [3] - Starbucks plans to increase its global store count by 6% this year, which is expected to support low single-digit revenue growth [3] Market Position and Valuation - Shares are currently trading at around 20 times the midpoint of management's 2024 EPS guidance, which is below the average for the past decade but similar to levels from two years ago [5] - The bearish perspective suggests that if the current outlook is worse than in 2022, the stock may not be significantly undervalued despite the recent sell-off [5] Future Outlook - There is cautious optimism regarding the potential for Starbucks to outperform lowered expectations in the coming quarters, which could lead to a sustained rally [7] - Risks remain, including the possibility of economic deterioration impacting sales, but a position in Starbucks stock near its two-year low may be beneficial within a diversified portfolio [7]