What's Next For Starbucks' Stock After An Upbeat Q1?

Core Insights - Starbucks stock has increased by 21% year-to-date, reaching approximately $111 per share, outperforming the S&P 500 which grew by 3% in the same period [1] - The company's first-quarter earnings showed a decline in net income to $780.8 million, or $0.69 per share, compared to $1.02 billion, or $0.90 per share, in the previous year [2] - Same-store sales decreased by 4%, marking the fourth consecutive quarter of decline, with significant drops in both U.S. and Chinese markets [2] - Operating expenses surged, compressing margins by 390 basis points to 11.9%, below the ten-year average of 15.1% [2] - Starbucks' revenue for fiscal year 2025 is forecasted to be $37.9 billion, a 5% year-over-year increase, with earnings per share expected at $3.05 [4] Financial Performance - Net sales for the fiscal first quarter remained unchanged at $9.4 billion [2] - Same-store sales in the U.S. fell by 4%, with an 8% decline in store traffic, while in China, same-store sales decreased by 6% [2] - The decline in net income and same-store sales indicates a need for strategic adjustments, particularly in international markets [2] Market Position - Starbucks' stock has shown inconsistent performance over the last four years, with annual returns of 11% in 2021, -13% in 2022, -1% in 2023, and -2% in 2024 [3] - The company's stock has outperformed peers like McDonald's, which has remained flat this year [1] Valuation - The revised valuation for Starbucks is set at $100 per share, based on a projected EPS of $3.05 and a P/E multiple of 32.9x for fiscal year 2025, which is nearly 8% lower than the current market price [4]