Starbucks Corp (NASDAQ:SBUX) Earnings Model
Author: John Battles, Published: October 27, 2020 9:42pm Category: Earnings Preview (Fiscal 4Q2020)
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.
Note From the Model Developer: I believe that Starbucks will begin to recover in Q4 2020 and Q1 2021 before a rise in COVID cases combined with the Flu force some closures and changes in the US. For this reason, I have forecasted a better Q4 and Q1 before having revenues decline, albeit not as badly as the prior shutdown, for Q2 and Q3 in 2021. In the long term I view Starbucks as a mature company with long term steady growth through the opening of new stores and development of new products.
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.