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Is it time to Buy Starbucks (SBUX) or Chipotle (CMG) Stock for a Rebound?
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When it comes to retail restaurant chains with a conquering niche, Starbucks (SBUX - Free Report) and Chipotle (CMG - Free Report) have dominating franchises related to coffee and Mexican cuisine respectively.
This has made their stocks favorites among many investors who may be wondering if SBUX or CMG shares are poised for a rebound after recent market volatility and a noticeable dip over the last month.
Image Source: Zacks Investment Research
Evaluating the Recent Dip
Chipotle’s stock is still up +33% for the year although Starbucks stock is now down -5%. Starting with the price-to-earnings valuation of both stocks is a great way to see if it's a good time to buy after the recent selloff.
Starbucks' stock certainly looks more intriguing trading at a 26.3X forward earnings multiple. This is near the Zacks Retail-Restaurants Industry average of 22.5X and not an overly stretched premium to the S&P 500’s 19.7X.
Furthermore, SBUX shares trade well below their five-year high of 97.6X forward earnings and at a slight discount to the median of 29.9X.
Image Source: Zacks Investment Research
As for Chipotle, its stock has been able to command a high premium over the years due to its expansive bottom line growth but CMG shares are trading attractively relative to its past as well.
At 43X forward earnings, Chipotle’s stock trades 69% below its own five-year high of 141.5X and at a 21% discount to the median of 54.6X.
Image Source: Zacks Investment Research
Growth & Outlook
With Starbucks having a large presence in China there has been much optimism about the company’s continued growth after the reopening of the Chinese economy earlier in the year.
To that point, Starbucks reported record revenue of $9.16 billion for its most recent fiscal third quarter after Q3 sales in China jumped 46% year over year. Total sales are now projected to be up 11% in fiscal 2023 and jump another 11% in FY24 to $39.67 billion.
On the bottom line, Starbucks' annual earnings are forecasted to jump 17% this year and climb another 17% in FY24 at $4.06 per share.
Image Source: Zacks Investment Research
Chipotle has largely conquered its operating expenses making it one of the most profitable restaurant chains in the United States in terms of gross margins.
Illustrative of such, sales are expected to rise a very respectable 13% in FY23 to $9.81 billion but Chipotle's earnings growth is astonishing, with EPS forecasted to soar 31% to $43.16 a share. Fiscal 2024 sales are expected to jump another 12% with earnings anticipated to climb another 21% to $52.10 per share.
Image Source: Zacks Investment Research
Takeaway
Considering Chipotle’s extremely lucrative earnings potential and more reasonable valuation after the recent dip in its stock, CMG shares land a Zacks Rank #2 (Buy). As for Starbucks, its stock currently lands a Zacks Rank #3 (Hold) but is becoming more attractive after the recent dip as well.
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Is it time to Buy Starbucks (SBUX) or Chipotle (CMG) Stock for a Rebound?
When it comes to retail restaurant chains with a conquering niche, Starbucks (SBUX - Free Report) and Chipotle (CMG - Free Report) have dominating franchises related to coffee and Mexican cuisine respectively.
This has made their stocks favorites among many investors who may be wondering if SBUX or CMG shares are poised for a rebound after recent market volatility and a noticeable dip over the last month.
Image Source: Zacks Investment Research
Evaluating the Recent Dip
Chipotle’s stock is still up +33% for the year although Starbucks stock is now down -5%. Starting with the price-to-earnings valuation of both stocks is a great way to see if it's a good time to buy after the recent selloff.
Starbucks' stock certainly looks more intriguing trading at a 26.3X forward earnings multiple. This is near the Zacks Retail-Restaurants Industry average of 22.5X and not an overly stretched premium to the S&P 500’s 19.7X.
Furthermore, SBUX shares trade well below their five-year high of 97.6X forward earnings and at a slight discount to the median of 29.9X.
Image Source: Zacks Investment Research
As for Chipotle, its stock has been able to command a high premium over the years due to its expansive bottom line growth but CMG shares are trading attractively relative to its past as well.
At 43X forward earnings, Chipotle’s stock trades 69% below its own five-year high of 141.5X and at a 21% discount to the median of 54.6X.
Image Source: Zacks Investment Research
Growth & Outlook
With Starbucks having a large presence in China there has been much optimism about the company’s continued growth after the reopening of the Chinese economy earlier in the year.
To that point, Starbucks reported record revenue of $9.16 billion for its most recent fiscal third quarter after Q3 sales in China jumped 46% year over year. Total sales are now projected to be up 11% in fiscal 2023 and jump another 11% in FY24 to $39.67 billion.
On the bottom line, Starbucks' annual earnings are forecasted to jump 17% this year and climb another 17% in FY24 at $4.06 per share.
Image Source: Zacks Investment Research
Chipotle has largely conquered its operating expenses making it one of the most profitable restaurant chains in the United States in terms of gross margins.
Illustrative of such, sales are expected to rise a very respectable 13% in FY23 to $9.81 billion but Chipotle's earnings growth is astonishing, with EPS forecasted to soar 31% to $43.16 a share. Fiscal 2024 sales are expected to jump another 12% with earnings anticipated to climb another 21% to $52.10 per share.
Image Source: Zacks Investment Research
Takeaway
Considering Chipotle’s extremely lucrative earnings potential and more reasonable valuation after the recent dip in its stock, CMG shares land a Zacks Rank #2 (Buy). As for Starbucks, its stock currently lands a Zacks Rank #3 (Hold) but is becoming more attractive after the recent dip as well.