On Wednesday the market was hit with a 49.4% loss on Starbucks taking share price down to $47.55.
The Seattle-based coffee house with 21,878 outlets (as of December 28, 2014) worldwide had its sixth stock split since its IPO 23 years ago. Though announced on 18 March, many brokers were caught unaware and lost thousands on swap rates as the stock split came into effect on 9 April.
The two-for-one stock split gave shareholders of record as of March 30, 2015 one additional share for each share held on the record date. Howard Schultz, chairman and ceo of Starbucks Corporation said in an announcement, “This split is a direct reflection of the past seven years of increasing shareholder value, enhancing the liquidity of our shares, and building an attractive share price. It also takes place at a time when Starbucks shareholders are experiencing an all-time high in value as we continue to deliver world-class customer service and, in turn, record profits and revenue.”
Analysts are generally agreed on the price target for the new stock with Piper Jaffray increasing the target price from $53 to $55 and maintaining its overweight status. Scott Maw, chief financial officer of Starbucks Corporation noted, “Adjusting for the stock split effectively has the impact of modestly increasing our earnings guidance for the second quarter and for fiscal 2015.” Keith Siegner of UBS raised the target price from $47.5 to $48, and Peter Saleh of Telsey Advisory Group, pushed his forecast from $50.5 to $51. The two extremes are Sanford C. Bernstein & Co seeing Starbucks coming in at $56, and Credit Suisse at $24.25.
Over the last 3 days of trading the stock has steadied though some volatility is expected as the company is due to report Q2 earnings on 23 April with an expected lift in EPS. Starbucks announcement regarding the split said, ‘On a split adjusted basis, the company’s previously communicated GAAP and non-GAAP earnings per share targets equate to GAAP EPS of $0.32 and a non-GAAP range of $0.32 to $0.33 for the second quarter of fiscal 2015, and a GAAP range of $1.77 to $1.79 and a non-GAAP range of $1.55 to $1.57 for the full fiscal year 2015.” This is versus an EPS of $1.30 at first quarter 2015. Piper Jaffray analysts are predicting $1.57 earnings per share (EPS) after the stock split.
Starbucks 2-for 1 Stock Split history (courtesy Starbucks Coffee Company)
MT4 chart: Starbucks
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