Should You Buy Starbucks Stock For 2016?

  • Starbucks stock has had a strong year in 2015, gaining 48% through the year.
  • Starbucks registered strong topline and earnings growth through 2015.
  • Can Starbucks stock carry the strong momentum into 2016?

Starbucks has delivered a solid performance for its shareholders in 2015, with the stock gaining 48% in comparison to a loss of 0.7% in the S&P 500. While this has been, beyond doubt, a stellar performance, an important question is whether or not starbucks stock can carry the strong momentum into 2016.

SBUX stock chart

Source: Starbucks stock price data by amigobulls.com

Strong Growth In Fundamentals

Starbucks has registered a strong growth in earnings and revenue over the last 8 quarters. The company has been able to maintain an upward trend on a YoY basis, which has been very encouraging. Starbucks registered a 17% topline growth and a 34% growth in earnings in FY 2015 (Sep ending) With the holiday quarter being the cyclical high for the company, Starbucks should be able to maintain this uptrend and meet wall street estimates consensus of 45 cents earnings in Q1 2016 (Dec 2015).

Note: You might also be interested in '5 Things To Consider Before Investing In Starbucks Stock'

Mobile Transactions On The Rise

Another positive for Starbucks has been the strong growth in mobile transactions. With over 12 million members subscribed to its loyalty program, the company now sees 15% of US transactions made through mobile phones. At a time when users are increasingly spending a greater amount of time on phones/tablets, this is a definite positive for the coffee giant.

Coffee Prices Aid Starbucks Margins

With the coffee commodity prices hitting multi-year lows, even as Starbucks prices remain constant, Starbucks has seen a strong growth in margins. With the current fall in commodity prices expected to continue, Starbucks should be able to register more than comfortable profit margins.

Conclusion

In conclusion, Starbucks stock has a lot of positives going for it, which should help the stock carry the strong momentum into 2016. While increasing mobile transactions should aid topline growth, depressed coffee prices should aid margin expansion. Given the positives outlined above and also its expansion into the Asian markets, Starbucks stock enters 2016 as a strong buy. Do you disagree with this idea? Do let us know in the comments section below.

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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