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Starbucks is one of the leading coffee house chains in the world. The company retails, sells and provides its own special brand of coffee as well as other beverages and food types. Starbucks was founded by Jerry Baldwin, Zev Siegl and Gordon Bowker in 1971 and is headquartered in Seattle, Washington, USA.
The company has been credited with contributing to the second wave of coffee culture. Starbucks is a multinational company that has operations in over 70 countries, with more than 30,000 stores decorated with the iconic green mermaid. As an established café chain, Starbucks’ original business operations involved the retail of roasted coffee beans and related coffee equipment.
Quality was always the company’s differentiating factor, and it inspired incredible loyalty from its customers. The idea to go the café way came from one of the company’s employees, Howard Schultz, who was enchanted by the culture and romance of coffee bars during a trip to Italy.
Schultz was convinced the future of Starbucks was cafés, but his employers did not share the vision. Schultz then proceeded to set up his own café that exclusively sold Starbucks coffee, Il Giornale. It was an instant hit. The Starbucks wholesale business started facing tough times as flavoured coffee from the competitors gained traction among customers.
The founders of the company proceeded to sell the company to Schultz, who combined his businesses under the Starbucks brand. He pursued the café concept aggressively, and the rest, as they say, is history. The company went public on June 26th, 1992, listing on the NASDAQ Global Select Market where it trades under the ticker symbol SBUX. The stock falls in the Consumer Cyclicals sector, under the Restaurants industry.
SBUX Stock History
The SBUX IPO price was $17, but when adjusted for splits and dividend income, it is a paltry $0.18. The company has performed 6, 2-for-1 stock splits in its history, with the last one being on April 9th, 2015. The SBUX price chart shows a company that has largely maintained a positive trajectory. Massive expansion at the turn of the century saw the stock rise from around $5 in early 2002 to circa $20 by late 2006.
Around 2007, there were concerns that the company was sacrificing quality for profits and coupled with the effects of the 2008 economic collapse, SBUX tumbled to lows below $5 by Q1 2009. Following the restructuring of the company to focus on consistent quality as well as a recovering global economy, SBUX started a long-term bullish trend that saw the stock print its all-time high of just below $100 in July 2019.
The year 2020 was a disastrous for the stock as shops closed due to the coronavirus pandemic, but an initial dip to lows of circa $55 started to overturn as economies around the world began to open again. Starbucks started paying dividends in 2010 and has continually increased or maintained payouts even during crises.
How to Trade Starbucks Stock
Here are some of the factors to consider when trading Starbucks stock:
- Legislative and Taxation Issues
Starbucks operates in an industry that is prone to frequent regulatory scrutiny. The food industry is one of the most legislated upon, with governments around the world keen to ensure that players push towards healthy products for consumers. This may mean that Starbucks may continually be forced to update its menu, which can result in removing popular products. As a multinational and a major employer throughout the world, Starbucks is also vulnerable to varied taxation levels in multiple jurisdictions, which can impact its bottom line significantly.
- New Product Rollout
Consumers usually change their food consumption trends, and Starbucks needs to meet their needs continuously. The company routinely offers holiday flavours and customised local cuisines, but there is an opportunity to take advantage of the latest food technologies to boost its rather thin product line. Over the years, Starbucks success has been fuelled by hit products, and this remains a prudent growth strategy going forward. However, if new products don’t gain traction, investors may punish the SBUX stock.
Starbucks enjoys high brand recognition and customer loyalty, but it also faces fierce competition from many quarters. Numerous local coffeehouses offer lower-priced products compared to Starbucks. Furthermore, multinationals, such as McDonalds and Dunkin Donuts, also pose a significant threat to Starbuck’s market share both locally and internationally. Starbucks products are priced at a premium, and this can encourage competitors to take them on aggressively in emerging markets or even during periods of economic downturn.
- Periodic Earnings Reports
The fiscal year calendar for Starbucks runs from October to September. The company releases quarterly, semi-annual and annual reports to keep investors up to date with their business health. The most important metrics to watch out for include progress in the U.S. and China (their most important markets), overall revenue, new stores opened, stores closed, as well as cash in hand. Positive reports will typically inspire demand for the SBUX stock, but negative reports can trigger lower stock prices.
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Starbucks stock FAQ
- Why should I trade Starbucks shares?
With its global operations and over 32,000 retail stores, Starbucks is arguably the best-known coffee chain in the world. There are few places in the world where you won’t find a Starbucks, and this brand recognition has given the company strong pricing power. A quick look at the stock chart will also reveal that Starbucks shares have been trending higher over much of the time the stock has been publicly traded, making it a good choice for trend-following trading strategies. For traders who like to understand the business that a company is operating in Starbucks makes a good choice, since its retail coffee sales are easily understood.
- Is Starbucks the best food service stock for trading?
There are many global brands within the food service industry, and among them Starbucks has always been a standout. It is the strongest stock in the group at times, while at others it may be a laggard. In these cases, short sales can also work well for periods of time. Starbucks may not always be the best stock in the group for trading, since market conditions are always changing, but it is always a good idea for a trader to keep an eye on this stock since it has a tendency to trend for long periods of time.
- What’s the best strategy for trading Starbucks shares?
Because of the trending behaviour of the stock either a trend following or a momentum strategy can work well when trading Starbucks shares. There have also been times when shares have remained trapped in a range over a period of time, and using support and resistance levels for entry points during these times is a superior strategy. Because Starbucks is someone dependent on consumer behaviour this is one stock where watching fundamental factors can also aid greatly in determining trading positions. Starbucks traders need to be nimble and ready to change their trading strategy at any time.