Starbucks Corp (NASDAQ:SBUX) Earnings Model  

Author: Darsh Parekh, Published: October 23, 2021 Category: Earnings Preview (Prior to the F4Q2021 SBUX Results)
Notes From the Model Developer: My model assumptions are based on the following three points:
  • TAM expected to increase by 8-9%, and Starbucks is well adapted to meet consumers changing tastes.
  • International sales will decrease as Delta Variant hits other high population countries such as Japan, China and India.
  • Cold weather in Brazil will lead to increased coffee prices after the year 2022.
SBUX Model (D.Parekh).xlsx
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File Type: xlsx
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ERP Model (D.Parekh).xlsx
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Valuation: I have decided to use NTM P/E multiple based on historic monthly closing prices. This is mainly because I have changed the ERP model to have a relatively optimistic view of the economy. Therefore, in order to remain consistent with my beliefs, using estimates would not be accurate as they would not incorporate my assumptions about the economy made in the ERP model. 
Equity Risk Premium Forecast Assumptions: 
  • Fed Funds Rate: I have an optimistic view of the that the economy will continue to recover therefore have left them the same for most years, decreased by 10 basis points in 2023. 
  • Quarterly Spread: Remaining consistent, since I believe the economy will begin to recover, I have increased the spread by 15 basis points for the first starting Q4 2022, and then experience slower growth, therefore changed the spread to 10 basis points after that. 
  • Volatility: I believe that the economy will begin to recover mid 2022, therefore have increased volatility to 26 in Q3 2022, and 24 in Q4 2022. Do not expect it to reach COVID levels, so kept it somewhere in the middle. Also, expect it to reach historic volatility by the end of 2023, and have straight-lined it for the remaining year. 
  • Equity market return projections: I expect the market to recover in 2022 (10%), followed by a small correction in late 2022/early 2023 (-1.75% and -2.00%), after which I have kept the rates constant at 2.75%. 
​Disclosure: ​The author of this article/model has no financial investment or other conflict of interest related to the subject company or other companies discussed. Any views made or implied in the content represent the author’s opinions.