Why is Starbucks so Cheap?

“Deep Brew” and the digital renaissance of luxury lattes continues.

Andrew Willis 29 April, 2022 | 6:56AM
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Andrew Willis: If you’re a frequent buyer of Starbucks (SBUX), you’re willing to pay a premium for predictable product and service quality. Only a few companies can pull it off – and that’s something investors should value as well.

Artificial intelligence-driven efficiency, integrated right down to the coffee machines… automated inventory management and scheduling, along with the ability to flag maintenance issues to prevent downtime… “Deep Brew” is only one example of the company’s digital advantage.

Starbucks also bet on an expansion of its digital loyalty and ordering program, which has paid off with those members making up about 50% of sales volume now, according to equity analyst Sean Dunlop. We think the company’s earned a wide moat and our current fair value estimates show that, unlike the customers, investors can enjoy it without paying a premium.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Starbucks Corp74.49 USD2.77Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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