Starbucks Corporation (NASDAQ: SBUX) shares have weakened from their record highs above $126, registered in July 2021, and the current price stands around $113. Starbucks reported better than expected third-quarter results, but the company currently faces potential risks mainly due to inflation and covid concerns.
Fundamental analysis: J.P.Morgan sees potential risks for the upcoming quarters
Starbucks is an American multinational chain of coffeehouses and roastery reserves that operates over 30,000 locations worldwide in more than 70 countries. Starbucks has a very good position in the market; the company reported better than expected third-quarter results in July and raised revenue guidance for the 2021 fiscal year.
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“Starbucks delivered a record performance in the third quarter, demonstrating powerful momentum beyond recovery. Our ability to move with speed and agility and to be out in front of shifting customer behaviors has helped further differentiate Starbucks, positioning us well for this moment,†said Kevin Johnson, President and CEO.
Total revenue has increased by 77.7% Y/Y to $7.5 billion in the third fiscal quarter, while the GAAP EPS was $0.97 (beats by $0.20). Starbucks expects revenue for the 2021 fiscal year to be between $29.1 billion and $29.3 billion (the previous midpoint was $28.8 billion).
The non-GAAP EPS should be in the range of $3.20 to $3.25 for the 2021 fiscal year, and it is important to mention that global comparable-store sales should rose more than 15% in the fourth fiscal quarter. Despite this, the Delta variant of the coronavirus, together with further new variants, especially ones that might not be stopped by existing vaccines, still poses downside risks.
J.P.Morgan sees potential risks for the upcoming quarters mainly due to inflation together with covid concerns, and probably it is not the best moment for buying Starbucks shares. Coffee prices are up more than 35% for the year, and there are some transitory supply issues with coffee stockpiles held in ports higher than normal.
Another negative news is that Starbucks employees have complained about worsening conditions, but the company reported that it would be in their best interests to vote against a union. Starbucks currently has no unions at any of its company stores, and the group of employees ​filed a petition with the National Labor Relations Board (NLRB).
Technical analysis: Starbucks shares have weakened from their record highs
Starbucks shares have weakened from their record highs above $126, and if the price falls below $100 support, it would be a strong “sell†signal. On the other side, if the price jumps again above $120 resistance, it would signal trading shares, and the next target could be around $125 or even 130.
Summary
Starbucks reported better than expected third-quarter results in July and raised revenue guidance for the 2021 fiscal year; still, it is probably not the best moment for buying Starbucks shares. Starbucks shares have weakened from their record highs above $126, and the Delta variant of the coronavirus continues to pose downside risks.
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