Starbucks Corp (NASDAQ:SBUX) Earnings Model
Author: Austin Smith, Published: October 28, 2020 8:49pm Category: Earnings Preview (Fiscal 4Q2020)
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Model Description: This model predicts earnings and cash flows for Starbucks Corp (NASDAQ:SBUX) driven by estimates of comp-store sales and store count estimates. Ratio analysis is used to complete the financial statements. The Equity Risk Premium Model (ERP) uses the Fed Funds rate, 10-year U.S. Treasury rate, implied volatility, equity market returns, and the Constant Sharpe Approach, to estimate the Equity Risk Premium (ERP). The ERP and the Capital Asset Pricing Model (CAPM) are used together to calculate the required return on equity for the DCF-based share valuation within the Starbucks model.
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Notes from the Model Developer: My projections for Starbucks fall within consensus estimates for the upcoming quarters and year ends. My projections are largely based on an increase in brick and mortar stores in the Americas and International segments. I believe that these increases are not one time, COVID-19 related changes, but will persist through the future in an attempt to gain more market share and ultimately produce higher revenue. Line item changes include additions to new company operated stores, other company-operated revenue (stores open less than 13 months), and operating expenses as a percent of revenue. I made these line item changes to not only the Americas segment, but also the International segment. Further reasoning is included in comments within the model.
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.