Starbucks (SBUX) has the most recognizable coffee brand in the world. What started out as a small coffee shop that opened in Seattle's Pike Place Market in 1971 has now become an international conglomerate. The chain has over 36,000 locations across the world as of the second quarter of the 2023 fiscal year.

Initial 澳洲幸运5官方开奖结果体彩网:investors were pessimistic about the 💟company's long-term prospects, with the com🅰mon argument being "people are not going to keep paying so much money for just a cup of coffee." But Starbucks continues to prove that it has staying power and impressive growth prospects.

Even though Starbucks' 澳洲幸运5官方开奖结果体彩网:initial public offering (IPO) took place back in 1992, the period after 201♌0 saw its prices skyrocket. Unsurprisingly, the stock garnered a lot of positive press for its performance. However, there are some real risks facing the Starbucks brand in the future, including global competition, commodity prices, and changing dynamics in the retail market.

Starbucks' Stock Performance

We've all heard that saying before: "What goes up must come down." But does that apply to Starbucks? There is really no reason to believe that Starbucks will continue to grow or fall regardless of 澳洲幸运5官方开奖结果体彩网:market trends and conditions. Instead, investors need to investigate whether a stဣock is a good buy based on expected future results🔯—not on what has occurred in the past.

澳洲幸运5官方开奖结果体彩网:Future earnings growth depends on a number of factors, including consumer tastes, government regulations, corporate managementꦫ, input prices, and others. These factors are present in any business, but every company interacts with them differently. Starbucks is no exception.

The company’s market valuations look relatively strong going in mid-2023. As of July 3, 2023, Starbucks shares sold for $99.06. Over the past ten years, it reports an annualized total return of 13.46% with a forward dividend yield of 2.14%. The company is well established in the market with a payout ratio of 65.87% and a 澳洲幸运5官方开奖结果体彩网:trailing 12-month (TTM) free cash flow of $2.75 billion.

Starbucks had a 澳洲幸运5官方开奖结果体彩网:price-to-earnings (P/E) ratio of 31.95. Combine that with its five-year monthly average beta of 0.95 and the risks look somewhat moderate in the near term. Having said that, consumer cyclical stocks are highly prone to certain risks as spending changes and consumer preferences can trend toward lower-cost options. Below are a few f🌱actors for investors to watch out for that could always undermine future ear⛄nings growth.

Starbucks' Competition

Competitors abound from all sides of the consumer cyclical restaurant and beverage industry. Starbucks competes with several other low-cost providers including Dunkin Donuts, McDonald's, and c𒐪onvenience store brands, not to mention the hot and cold beverage competition from companies like Coca-Cola and Pepsi, which are always looking for the newest emerging brand names.

Partnerships are also a variable for competition. Starbucks has locations inside many other retailers, such as Best Buy and Target stores in the United States. Keeping these partnerships and keeping the competition from aligning in these channels is also important. Operationally keeping its brand alive through par𓂃tnerships with suppliers like Walmart, Target, and other retailers, including online retailers, is also critical.ꦜ

Commodity Price Fluctuations

Starbucks openly admits it is vulnerable to 澳洲幸运5官方开奖结果体彩网:commodity prices. The company spends an extraordinary amount of money on coffee beans, sugar, milk, and other commodities. It is not nakedly exposed to commodity fluctuations. Starbucks uses derivative contracts as a hedge just in case prices skyrocket. And there is evidence to suggest these measures are e🐬ffective fo💟r their bottom line.

Market Risk

Investors know that the American 澳洲幸运5官方开奖结果体彩网:stock market has taken some hits. But it has proven its resilience, rebounding back after some troubling times, including the lows of 2009 and 2020. Stocks in nearly every sector have been able to t💃ake advantage of this and most investment advisors are bullish on the future.

But the risks of a bear market still abound because of a number of factors, including the rise in 澳洲幸运5官方开奖结果体彩网:interest rates and 澳洲幸运5官方开奖结果体彩网:trading volatility. The beta of 0.95 for Starbucks limits these risks but bear markets each have their own catalysts and if combined with some other idiosyncratic risks it could be more severely har💜mful.

Underperformance in Emerging Markets

Many prime areas in the United States already have Starbucks locations, which means the market is becoming saturated. Comedian Lewis Black once joked he ran across two Starbucks cafes located directly across the street from each other in Texas. As such, the company began looking elsewhere, deploying significant capital to 澳洲幸运5官方开奖结果体彩网:expand into international markets

Domestic 澳洲幸运5官方开奖结果体彩网:saturation is not always the best driver for international expa꧂nsion though and there is no guarantee that the international markets will have acceptance rates that mirror the U.S. The company made significant investments in China and India with Starbucks Coffee China and Asia Pacific, but these endeavors are still evolving.

Investors should pay particular attention to the performance of foreign-placed Starbucks cafes, particularly CAP. CAP has had some success, but competitor brands are also moving into the same emerging markets, including large franchises from Yum! Brands and McDonald's with the McCafe.

The Bottom Line

Some investors believe Starbucks could be peaking after prolonged market success. A potential impending 澳洲幸运5官方开奖结果体彩网:bear market combi♑ned with economic and spending retractions could be a problem for Starbucks and its investors as luxury brands would take a hit in this scenario.

New global expansion is also a risk as international markets have different preferences and adoption levels. Expansion from developed markets to emerging markets can also h꧒ave higher risks as spending psychologies can differ dramatically.

As with all equities and consumer cyclical stocks, it is especially important to 澳洲幸运5官方开奖结果体彩网:monitor the systematic changes along with the idiosyncratic changes to stay ahead of any and all potential losses that can possibly be avoided or hedged with active𒐪 investing.