Starbucks Adds Three New Risks to Profile


Washington-based Starbucks (SBUX) operates a global chain of coffeehouses. It recently launched a service that lets customers order and pick up their coffee at an Amazon Go location in New York City. The service will be extended to more locations next year.

Starbucks recently sold its 50% stake in a Korean joint venture and raised about $1.2 billion. The company has committed to return $20 billion to its shareholders through dividends and share repurchases over the next three years. Additionally, it plans to raise wages for its workers starting 2022.

With this in mind, let us look at the company’s recent financial results and understand its newly added risk factors. (See Analysts’ Top Stocks on TipRanks)

Q4 Financial Results

Starbucks reported revenue of $8.1 billion for the fourth-quarter of its Fiscal Year 2021, The consensus estimate for the same was pegged at $8.2 billion. It posted adjusted earnings of $1, beating the consensus estimate of $0.99. Starbucks ended the quarter with $6.5 billion in cash. It plans to distribute a quarterly cash dividend of $0.49 per share on November 26. (See Starbucks stock charts on TipRanks).

Risk Factors

According to the new TipRanks’ Risk Factors tool, SBUX’s main risk categories are Production, Macro & Political and Ability to Sell, which account for 25%, 25% and 21%, respectively, of the total 24 risks identified for the stock. It has recently updated its profile with three new risks.

Under the Tech & Innovation risk category, the company tells investors that it has built a portfolio of intellectual property important to the success of its business. The intellectual property includes patents, trademarks, copyrights and trade secrets. Starbucks says that failure to adequately protect its intellectual property could harm its business and brand value.

Under the Ability to Sell risk category, Starbucks highlights that it operates in a competitive environment. The company warns investors that if its marketing and advertising programs fail to work as intended, its sales and market share could decline. Additionally, Starbucks cautions that its financial results may be adversely affected if it fails to meet customer expectations on sustainability and environmental impact matters.

Under the Legal & Regulatory risk category, Starbucks highlights that it is subject to stringent and rapidly evolving privacy and data protection laws both in the U.S. and international markets. The company cautions that complying with the increasing privacy and data protection requirements will increase its costs that could in turn adversely affect its financial condition. It further warns that failure to comply with the requirements could subject it to regulatory penalties, lawsuits, and may damage its brand reputation and adversely affect its business.

The Production risk factor’s sector average is at 13%, compared to SBUX’s 25%. Shares of the company have gained about 4% year-to-date.

Analysts’ Take

In early November, Deutsche Bank analyst Brian Mullan reiterated a Buy rating on the stock but lowered the price target to $122 from $127. Mullan’s reduced price target suggests 10.13% upside potential.

Consensus among analysts is a Moderate Buy based on 14 Buys and 8 Holds. The average Starbucks price target of $124.24 implies 12.15% upside potential.

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