Although the S&P 500 has been achieving historic highs this year, not all member companies are having the same luck. Starbucks in particular had a rough first quarter. But is this a sign of ongoing trouble, or should you buy low before it bounces back?
Exploring The Recent Past
Investors were spooked by Starbucks’ recent troubles. After all, it’s a company with a long history of beating expectations, often by significant margins. The poor first quarter sent its stock plummeting, and it is now trading at about 30% less than its 52-week high. The company’s difficulties are largely due to a decline in customer traffic of about 6%, along with softening same-store sales.
A Look at The Numbers
So what does all this mean for investors? As it turns out, the news is not all bad. In fact, Starbucks is currently paying a healthy dividend of about 3%. The headwinds are largely due to temporary external factors, including an overall decline in discretionary consumer spending. Starbucks does have notoriously high operational costs, but management is successfully implementing a disciplined cost-cutting program. Notably, Starbucks is also listening to customer feedback. The company is taking active steps to improve its mobile ordering and other aspects of the in-store experience, while simultaneously introducing food and beverage combos to entice cost-sensitive consumers.
It could take a little time for Starbucks to rebound. But it’s a solid and mature company with an excellent track record and, importantly, a highly loyal customer base. As economic fears fade and Starbucks’ new improvements start to take effect, there is every reason to believe that the company may emerge stronger than ever. If you’re a short-term investor looking for rapid growth, it might make sense to skip Starbucks for now. But if you want a strong dividend stock that’s likely to grow over time, now could be the time to buy the dip.
Lisa Fritscher does not have positions in Starbucks. Stocks.News does have positions in Starbucks.
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Contributing Writer
Lisa Fritscher has been a contributing writer for App.Stock.News since 2024. Lisa has been interested in investing since winning The Stock Market Game in high school. In more than a decade as a professional writer, she has written consumer-facing financial information and advice articles for a wide variety of publications. She has a Bachelor of Arts in Psychology from the University of South Flori...