Starbucks (NASDAQ: SBUX) stock sold off sharply after its most recent earnings report, resulting in the world's largest coffee chain losing nearly $15 billion in market capitalization. Anytime a bellwether stock like Starbucks takes a significant hit, a prudent investor will look to see if it's a possible bounce-back candidate. So, let's dive into Starbucks' latest earnings, its management's turnaround strategy, and valuation to see whether the stock is a buy or sell.
Starbucks recently released its fiscal 2024's second-quarter earnings report, in which the beverage retailer generated $8.6 billion in revenue. That marked a 2% year-over-year decline, partly attributed to a 6% decrease in transactions. Additionally, Starbuck's net income declined 15% from $908 million a year ago to $772 million in the latest quarter as its operating expenses, depreciation and amortization expenses, and general and administrative expenses all increased.
Starbucks CEO Laxman Narasimhan wrote that the quarter "did not meet our expectations." As a result, the company updated its fiscal 2024 revenue guidance from 7% to 10% growth to now "low-single-digits" growth. Notably, this was the second guidance downgrade after its initial fiscal 2024 outlook of "the low end of 10% to 12%" growth. Generally, anytime a company's management downgrades its outlook in two consecutive quarters, it will sow the seeds of doubt about its future growth potential.
