Starbucks ( NASDAQ:SBUX ) has struggled with rising input costs and geopolitical risk. However, I believe the company’s fortunes will soon change and that Starbucks stock is poised for a bullish reversion.
Costs of Pivoting Input
Starbucks’ recent tailwinds are mainly due to rising input costs. The company has recently struggled with rising commodity prices and rising wage demands. To put things in context, the company’s net income fell by 5.5% in the most recent earnings report (year-over-year).
Despite recent cost problems, Starbucks appears to be on the mend. The company’s revenue has resumed its upward trend; however, input costs seem to be reverting.
The price of Robusta and Arabica coffee beans has recently shifted due to supply/demand imbalances. Furthermore, data indicate that the long-term growth rate of coffee bean prices may begin to decline , potentially benefiting Starbucks.
Furthermore, U.S. wages and Starbucks’ SG&A costs have begun to taper, implying that labor market tightness may be easing, which could benefit Starbucks’ income statement.
Starbucks’ Brand Identity and Customer Loyalty
Despite recent headwinds from China-related issues, Starbucks’ third-quarter earnings report revealed a 9% year-over-year increase in U.S.-based same-store sales amid rising demand for cold beverages and snacks. This, in my...
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