Starbucks Issues Financial Forecast
Shares of the iconic coffee chain Starbucks saw its shares sink more than 3% in pre-market trade Wednesday after the company released a weaker than expected forecast for 2020 profits. Subsequently the stock was able to recover much of the losses and ended the day with a smaller loss of 0.7%. That recovery came as the stock found support at $93.03, or just above the 50-day moving average for the stock.
Still, investors were concerned with the weaker than expected 2020 forecast, especially after Starbucks crushed the recent third fiscal quarter expectations and raised guidance for 2019. Management cited a one-time 2019 tax benefit as causing significant headwinds for 2020 earnings. Previously Starbucks had guided for 13% EPS growth in fiscal 2020, but is now claiming growth will come in under 10%.
Even though the 2020 forecast had EPS below the 10% line, management emphasized that their long-term growth plan remains on track and that they expect to continue growing earnings at a double-digit clip. They also said that Starbucks had repurchased $2 billion worth of its own shares in 2019 rather than waiting until 2020 as previously planned. The company said the decision to pull the share repurchase forward was based on the “rapidly appreciating” price of the stock.
Shares of Starbucks are up by 49% so far in 2019, easily outpacing the 17% gain for the S&P 500. It is also one of the top ten stocks in the S&P 500 this year, and has gained more than 80% over the past 52 weeks.
