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Starbucks Recovery Continues to Stir

Seattle-based company Starbucks (SBUX) became a 1990s coffee giant with a historic rise. However, due to the recent COVID crisis, it saw an 11% fall in revenue in 2020.  Now,
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Seattle-based company Starbucks (SBUX) became a 1990s coffee giant with a historic rise. However, due to the recent COVID crisis, it saw an 11% fall in revenue in 2020. 

Now, as the economy recovers, SBUX stock has seen impressive momentum. This stock has continued to recover this year, showing impressive stability at a time when many other stocks are swinging wildly.

The reasons for this are obvious. The famous international coffee retailer has reopened almost all of its stores. However, Starbucks isn't out of the woods quite yet with respect to the pandemic. There's more that growth analysts and investors expect on the horizon. That said, Starbucks sales are soaring to levels above those prior to the global outbreak. 

As consumers gravitate toward their favorite brands, Starbucks stands to benefit from an elongated reopening thesis. Let's dive into why I'm bullish on this stock, and why investors might want to become more bullish on Starbucks right now. (See Starbucks stock charts on TipRanks)

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The Pandemic Can’t Touch Coffee!

One thing we've all seen on full display is how robust this company has been throughout the pandemic. Indeed, folks like to be caffeinated, whether a pandemic is underway or not.

This reality has been reflected in Starbucks' recent earnings results. In the company's most recent fiscal quarter, Starbucks saw revenue hit $7.5 billion. While that's an impressive number in absolute terms, this also represented a 78% year-over-year increase.

According to the company, customer mobility is one factor boosting sales. As the economy reopens, it's expected that this growth could actually pick up from here. We're all longing for human reconnection. Indeed, Starbucks' business model provides the "third place," or a place to rest other than work or home, for which consumers are looking.

Of course, concerns remain regarding how robust this recovery will be. Variants have continued to cause rising case loads in many parts of the country. Additionally, many workers are still working from home and foregoing their usual cup of Joe on the way to work. These factors continue to depress sales from where they otherwise may be.

That said, drive-thru, mobile ordering, and to-go orders remain strong. These are expected to offset in-restaraunt dining revenues that may otherwise wane.

All Down to Statistics

Of course, the pandemic has affected all businesses, and Starbucks is no exception. In September 2020, the company reported an earnings beat with an EPS of $0.79. Moreover, Starbucks reported cashflow of $1.6 billion from operating activities. However, the company's total revenue fell to $23.5 billion.

As the economy recovers, experts believe that Starbucks' revenues will increase by 21% and reach $28.5 billion for FY2021. Additionally, Starbucks' EPS figure is expected to be at $3.17. Experts also believe that the company's net income will expectedly reach $3.7 billion in 2021. These factors appear to be bullish for SBUX stock to continue its slow-and-steady recovery. 

What Are Analysts Saying About SBUX Stock?

As per TipRanks’ analyst rating consensus, SBUX is a Moderate Buy. Out of 18 analyst ratings, there are 12 Buy recommendations and 6 Hold recommendations. 

This stock has an average Starbucks price target of $130.33, implying an upside of 17.18%. Analyst price targets range from a high of $145 per share to a low of $105 per share. 

Bottom Line

Starbucks is a global brand with a strong presence. The company's position in the global coffee market, which is expected to grow to over $465 billion by 2026, is worth noting.

As when investing in any sector, picking the dominant company with the strongest brand is a strategy that has tended to work out for investors over the long-term. Accordingly, Starbucks is an intriguing stock to consider right now.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

The post Starbucks Recovery Continues to Stir appeared first on TipRanks Financial Blog.

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Economics

FT-IGM US Macroeconomists Survey for December

The FT-IGM US Macroeconomists survey is out (it was conducted over the weekend). The results are summarized here, and an FT article here (gated). Here’s some of the results. For GDP, assuming Q4 is as predicted in the November Survey of Professional…

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The FT-IGM US Macroeconomists survey is out (it was conducted over the weekend). The results are summarized here, and an FT article here (gated). Here’s some of the results.

For GDP, assuming Q4 is as predicted in the November Survey of Professional Forecasters, we have the following picture.

Figure 1: GDP (black), potential GDP (gray), November Survey of Professional Forecasters (red), November SPF subtracting 1.5ppts in Q1, 05ppts in Q2 (blue), FT-IGM December survey (sky blue squares), all on log scale. FT-IGM GDP level assumes 2021Q4 growth rate equals SPF November forecast. NBER defined recession dates peak-to-trough shaded gray. Source: BEA 2021Q3 2nd release, Philadelphia Fed November SPF, FT-IGM December survey, and author’s calculations.

In the figure above, I’ve used the SPF forecast of 4.6% SAAR in 2021Q4; the Atlanta Fed’s nowcast as of yesterday (12/7) was 8.6% SAAR. A new nowcast comes out tomorrow.

Interestingly, q4/q4 median forecasted growth equals that implied by the Survey of Professional Forecasters November survey (which was taken nearly a month before news of the omicron variant came out).

The q4/q4 forecast distribution for 2022 is skewed, with the 90th percentile at 5% growth, the 10th percentile at 2.5%, and median at 3.5%. I show the corresponding implied levels of GDP (once again assuming 2021Q4 growth equals the SPF ).

Figure 2: GDP (black), November Survey of Professional Forecasters (red), FT-IGM December survey (sky blue squares), 90th percentile and 10th percentile implied levels (light blue +), my median forecast (green triangle), all on log scale. FT-IGM GDP level assumes 2021Q4 growth rate equals SPF November forecast. NBER defined recession dates peak-to-trough shaded gray. Source: BEA 2021Q3 2nd release, Philadelphia Fed November SPF, FT-IGM December survey, and author’s calculations.

On unemployment, the median forecast is for a deceleration in recovery,

Figure 3: Unemployment rate (black), November Survey of Professional Forecasters (red), FT-IGM December survey (sky blue square), 90th percentile and 10th percentile implied levels (light blue +), my median forecast (green triangle). NBER defined recession dates peak-to-trough shaded gray. Source: BEA 2021Q3 2nd release, Philadelphia Fed November SPF, FT-IGM December survey, and author’s calculations.

The survey respondents also think that the participation rate will take a long time to return to pre-pandemic levels.

Source: FT-IGM, December 2021 survey.

On inflation, the median is higher than the November SPF mean estimate for 2022 of 2.3% (and Goldman Sachs’ current estimate).

Source: FT-IGM, December 2021 survey.

The entire survey results are here.

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Over 170 companies delisted from major U.S. stock exchanges in 12 months

  Over the years, United States-based exchanges have remained an attractive destination for most companies aiming to go public. With businesses jostling to join the trading platforms, the exchanges have also delisted a significant number of companies….

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Over the years, United States-based exchanges have remained an attractive destination for most companies aiming to go public. With businesses jostling to join the trading platforms, the exchanges have also delisted a significant number of companies.

According to data acquired by Finbold, a total of 179 companies have been delisted from the major United States exchanges between 2020 and 2021. In 2021, the number of companies on Nasdaq and the New York Stock Exchange (NYSE) stands at 6,000, dropping 2.89% from last year’s figure of 6,179. In 2019, the listed companies stood at 5,454.

NYSE recorded the highest delisting with companies on the platform, dropping 15.28% year-over-year from 2,873 to 2,434. Elsewhere, Nasdaq listed companies grew 7.86% from 3,306 to 3,566. Data on the number of listed companies on NASDAQ and NYSE is provided by The World Federation of Exchanges.

The delisting of the companies is potentially guided by basic factors such as violating listing regulations and failing to meet minimum financial standards like the inability to maintain a minimum share price, financial ratios, and sales levels. Additionally, some companies might opt for voluntary delisting motivated by the desire to trade on other exchanges.

Furthermore, the delisting on U.S. major exchanges might be due to the emergence of new alternative markets, especially in Asia. China and Hong Kong markets have become more appealing, with regulators making local listings more attractive. Over the years, exchanges in the region have strived to emerge as key players amid dominance by U.S. equity markets. As per a previous report, the U.S. controls 56% of the global stock market value.

A significant portion of the delisted companies also stems from the regulatory perspective pitting U.S. agencies and their Chinese counterparts. For instance, China Mobile Ltd, China Unicom, and China Telecom Corp announced their delisting from NYSE, citing investment restrictions dating from 2020.

Worth noting is that the delisting of firms was initiated due to strict measures put in place by the Trump administration. The current administration has left the regulations in place while proposing additional regulations. For instance, a recent regulation update by the Securities Exchange Commission requiring US-listed Chinese companies to disclose their ownership structure has led to the exit of cab-hailing company Didi from the NYSE.

Impact of pandemic on the listing of companies

The delisting also comes in the wake of the Covid-19 pandemic that resulted in economic turmoil. With the shutdown of the economy, most companies entered into bankruptcies as the stock market crashed to historical lows.

Lower stock prices translate to less wealth for businesses, pension funds, and individual investors, and listed companies could not get the much-needed funding for their normal operations.

At the same time, the focus on more companies going public over the last year can be highlighted by firms on the Nasdaq exchange. Worth noting is that in 2020, there was tremendous growth in special purpose acquisition companies (SPACs), mainly driven by the impact of the coronavirus pandemic. With the uncertainty of raising money through the traditional means, SPACs found a perfect role to inject more funds into capital-starving companies to go public.

From the data, foreign companies listing in the United States have grown steadily, with the business aiming to leverage the benefits of operating in the country. Notably, listing on U.S. exchanges guarantees companies liquidity and high potential to raise capital. Furthermore, listing on either NYSE or Nasdaq comes with the needed credibility to attract more investors. The companies are generally viewed as a home for established, respected, and successful global companies.

In general, over the past year, factors like the pandemic have altered the face of stock exchanges to some point threatening the continued dominance of major U.S. exchanges. Tensions between the US and China are contributing to the crisis which will eventually impact the number of listed companies.

 

Courtesy of Finbold.

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Economics

Stock futures open flat as Omicron concerns ease

Dow futures edged up 0.02%, while contracts on the Nasdaq Composite inched up 0.10%…
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Dow futures edged up 0.02%, while contracts on the Nasdaq Composite inched up 0.10%

Stock futures opened relatively flat on Wednesday evening, though sustaining gains posted by a three-day recovery rally that was led by cooled investor concerns around the Omicron variant of the coronavirus.

Dow futures edged up 0.02%, while contracts on the tech-focused Nasdaq Composite inched up 0.10%. All major indexes closed up, with the S&P 500 adding 14.46 points to end the session at 4,701.21, just 0.5% short of the trading session on Nov. 24, a day before the latest COVID-19 variant was announced by the World Health Organization (WHO).

The moves were supported by eased virus fears after Pfizer Inc. and BioNTech reported that early lab studies show a third dose of their coronavirus vaccine mitigates the Omicron variant.

The vaccine makers had indicated the initial two doses may not be enough to protect against infection from Omicron. Shares of Pfizer (PFE) traded 0.62% lower on Wednesday, closing at $51.40.

With virus concerns diminishing, investors are pivoting their attention back to economic data, awaiting Consumer Price Index (CPI) figures on Friday to assess the extent inflationary pressures will persist.

If the Omicron variant was to lead to a resurgence in goods spending at the expense of services or to further complicate supply disruptions, there could be a clear inflationary impact, too, HSBC economist James Pomeroy wrote earlier this week in a research note to clients.

He stated: The inflation news in the past few weeks has been decidedly mixed — with upside surprises in both the U.S. and eurozone being offset by the possibility of some of the supply chain issues starting to alleviate, while energy prices have fallen sharply in recent days.

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