Insider transaction activity can help investors cut through the data overload. Insiders are some of the most informed participants in the market and their buying and selling activity can provide investors with powerful insights.
In this report, we are going to highlight some interesting insider buying at Starbucks Corp (SBUX:US). Starbucks is the world’s largest coffee chain. Operating in over 80 markets, it has more than 30,000 stores worldwide. It’s listed on the Nasdaq and currently has a market cap of $101.6 billion.
Insider buying at Starbucks
Our data shows that on September 15, two insiders at Starbucks bought stock. Those who picked up shares were Non-Executive Chair Mellody Hobson, who purchased 54,750 shares at a price of $92.58 per share (total value: $5.1 million), and board member Richard Allison, who added 10,000 shares at a price of $92.53 per share (total trade value: $925,320). Combined, the two insiders invested a little over $6 million in Starbucks stock.
It’s the large purchase from Chair Mellody Hobson that stands out here. Ms. Hobson – who has served on the Starbucks board for over 15 years – has considerable investment experience. Currently, she is Co-CEO of Ariel Investments, LLC, a global value-based asset management firm. Prior to being named Co-CEO, she served as President for nearly two decades. Given her background, she is likely to have a good understanding of Starbucks’ investment potential.
Additionally, this insider trading activity comes just a few months after Interim CEO Howard Schultz invested $15.0 million in stock. So clearly, sentiment towards the stock within the company is quite positive right now.
A new era of growth
On September 13, Starbucks provided investors with new annual targets at its investor day in Seattle. The market was impressed with the numbers.
Starbucks said that over the next three years, it expects comparable store sales growth of 7% to 9% per year both globally and in the US, up from a prior forecast of 4% to 5%. Meanwhile, it advised that it expects non-GAAP EPS growth to be in the range of 15% to 20% annually through fiscal 2025, representing a significant improvement from the previous range of 10% to 12%.
As for store rollout, Starbucks expects to grow its global store portfolio by roughly 7% annually between fiscal 2023 to fiscal 2025, up from the previous estimate of approximately 6%. Globally, it expects to have 45,000 stores by the end of 2025.
Finally, Starbucks said that it plans to resume its share buyback in fiscal 2024. This should yield an annual EPS benefit of approximately 1%.
On the back of this update, a number of brokers raised their price target on the stock. For example, Morgan Stanley raised its target to $96 from $88 while Deutsche Bank went to $101 from $93.
In light of these developments, we see the insider buying here as a bullish indicator.