Ryan Tamashiro Luis Villacrez
STAR
BUCK
S Overview
Valuation
Enhancement
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Recommendation
Finance 440S.W.O.T
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Company Description- Who are they?
- Seattle’s Best Coffee (1971)
- Products- Espresso and Tea Beverages
- Pikes Place Market- Operates 22,519 Stores- Employs 191,000 Partners
- Retail Product lines- Consumer Packaged Goods- Ready to Eat and Drink Line
Company Description (cont.)
- How are they currently doing?
- Revenue: $20 Billion- Margins: 60% (Gross) 15% (Net)
- Market Capitalization: $82.3 Billion
- Positive Growth Trends - Awards and Recognition
Company Description (cont.)- What is their business strategy/model?
- Customer Centric - Serviced Based - Third Place- Brand Loyalty- Sustainable Growth
STAR
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S Overview
Valuation
Enhancement
Sensitivity
Recommendation
S.W.O.T
✔️
Strengths- Brand Recognition- Market Share- Employee Satisfaction
- Affordable Luxury- Brand Loyalty- Quality Products
Weaknesses- High Operating Costs- Business Model- Expensive Product Development
- Acquisitions- Joint Ventures
Opportunities
- Technology Innovation
- Foreign Expansion
- Tea Markets
- Strategic Partnership and Acquisitions
- Green Initiative
Risks & Threats- Low Barrier to Entry
- Commodity Price Pressure- Supply Chain Management
- Market Saturation- Exchange Rate Risk- Global Slowdown
STAR
BUCK
S Overview
Valuation
Enhancement
Sensitivity
Recommendation
S.W.O.T
✔️
Growth Rate:
Terminal Growth Rate:
Beta:
Cost of Debt:
Cost of Equity:
Market Premium:
Effective Tax Rate:
WACC:
DCF Assumptions18.07%
1.013.14%
10.84%8.86%
31.93%8.63%
3.00%
Model Considerations
- RD – Moody’s Credit Rating
- Beta Calculation (Regression)
- WACC- CAPM – Market Premium (5 year historical avg.)
- Risk-free Rate- Growth Rate
* Confirmed from the F.S.
DCF Valuation
PV FCFF:
PV Terminal Value:
Total Value of Firm:
Value of Debt:
Value of Equity:
# Outstanding Shares:
$15,594.57$49,800.39$65,384.96
$2,347.50$63,047.461.46 Billion
DCF Valuation: $61.19
Relative Valuation- Competitors
- No true competitors- Costa Coffee- Dunkin Brands- McDonalds
Dunkin Brands:
McDonalds:
Jamba Juice:
P/E P/S P/BV EV/EBITDA P/EBITDA43.06
26.35
21.98
5.37
4.54
1.06
N/A
16.37
15.47
15.86
14.64
N/A
13.11
15.91
N/A
Average: 30.46 3.66 15.47 15.92 14.51
SBUX Implied Price: $57.88 $42.98 $62.34 $35.78
Growth Rate:
Terminal Growth Rate:
Unlevered Beta:
Cost of Debt:
Unlevered Cost of Equity:
Market Premium:
Effective Tax Rate:
WACC:
APV Assumptions18.07%
1.01 .793.14%
10.84 8.89%8.86%
31.93%8.63 8.34%
3.00%
APV Valuation
PV FCFF (Unlevered RE):
PV Terminal Value (Unlevered RE):
PV Tax Shield (Cost of Debt):
Total Value of Firm:
Value of Equity:
# Outstanding Shares:
APV Valuation: $62.56$16,009.49$47,308.78
$388.98$63,707.25$61,359.751.46 Billion
STAR
BUCK
S Overview
Valuation
Enhancement
Sensitivity
Recommendation
S.W.O.T
✔️
Sensitivity Analysis
Growth Rate
WAC
C
STAR
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S Overview
Valuation
Enhancement
Sensitivity
Recommendation
S.W.O.T
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Value Enhancement- Strong International Growth Prospects
- Recovery in Europe
- New product lines/ Distribution Channels
- Innovative Capacity
PV FCFF:
PV Terminal Value:
Total Value of Firm:
Value of Debt:
Value of Equity:
# Outstanding Shares:
10-Yr. Extended Growth 2 Stage Growth
$39,510$76,373
$115,883$2,348
$113,536
$77.76
$29,948$76,373
$105,921$2,348
$103,5731.46 Billion
$70.941.46 Billion
Recommendation
STAR
BUCK
S Overview
Valuation
Enhancement
Sensitivity
Recommendation
S.W.O.T
✔️
STAR
BUCK
S Overview
Valuation
Enhancement
Sensitivity
Recommendation
S.W.O.T
BUYPrice Target: $70.94
Current Price: $56.45
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