This stock pitch project focus on 722-food services and drinking places industry and four companies research on Starbucks (NASDAQ: SBUX), The Cheesecake Factory (NASDAQ: CAKE), Buffalo Wild Wings (NASDAQ: BWLD), and Chipotle Mexican Grill (NYSE: CMG), including financial ratios, business strategy and governance, valuation comparing and investment risk in turn. Accordingly, we give our investment recommendation and price target in the end based on our analysis.

1. Group Project
Starbucks
Group B
Liu, Jiayin, Michelle
Wang, Zijie
Wu, Yao
Zhou, Yiyao, Joy

2. Company Overview
● Starbucks (NASDAQ: SBUX)
● Peers
➣The Cheesecake Factory (NASDAQ: CAKE)
➣ Buffalo Wild Wings (NASDAQ: BWLD)
➣Chipotle Mexican Grill (NYSE: CMG)
● NAICS-722: Food Services and Drinking Places

3. 722 - Food Services and Drinking Places● Rapid Growth in Line with Economy for the Coming Five Years
➣ Consumer Spending - 2% annual growth rate
➣ Consumer Confidence Index - 1.85% compounded growth rate from 2018 to 2023
(Source from Bureau of Economic Analysis)
● Highly Competitive
➣ Based on Price and Quality, as well as, location, style, ambience, hospitality and service
➣ Industry Concentration - LOW
➣ Entry Barrier - LOW
(Source from IBISWorld, http://clients1.ibisworld.com.resources.library.brandeis.edu/reports/us/industry/default.aspx?entid=1677)

4. Financial Ratios

5. Financial Ratios

6. Strategy (SBUX)
● Long-term Strategy: one of the most respected and recognized brands in the
world
● Increase market share
● Expand retail business
● Increase the scope of current business
● Specifically: acquisition of business in Mainland China, licensing stores in
Taiwan, Singapore, and parts of Europe, opening Princi sores, closing
Teavana retail stores, and selling TAZO

7. Technology (SBUX)
Technology Development
● Conversation ordering system, called My Starbucks Barista
● Largest mobile ecosystem all over the world in retailing industry
Product Innovation
● More coffee flavors
● New breakfast options
● Introducing organic soups and fresh-on-the-go lunch choices
● More products in grocery store

8. Dividend Policy (SBUX)

9. Valuation
● Model: DCF
● Estimate Period: From 2018 to 2022
● Steps:

10. Valuation - Assumptions
Revenue Growth Pattern

11. Different Revenue Growth Pattern

12. Different Revenue Growth Pattern

13. Valuation - Assumptions
Revenue Growth Rate
Americas 5.79%
CAP 39.06%
EMEA -2.04%
Channel Development 9.59%
All Other Segments 22.61%

14. Valuation - Assumptions
Cost
● Cost of sales including occupancy costs
41.56% of revenue
● Operating Expense
28.71% of revenue

15. Valuation - Assumptions
Other important items in B/S and I/S
● Property, plant and equipment
Growth rate: 11.86%
● Depreciation expense
20.72% of Property, plant and equipment

16. Valuation - Assumptions
Other important items in B/S and I/S
● Long-term Debt
Growth rate: 10.00%
● Interest expense
2.35% of Long-term Debt

17. Valuation - Assumptions
Terminal Growth Rate
3%

18. Valuation - Assumptions
WACC
Cost Weight
Equity 10.45% (Beta=0.68) 86.45%
Debt 2.44% 4.41%
Contractual Obligations 2.44% 9.14%

19. Valuation - Estimate Free Cash Flow

20. Valuation - Estimate Stock Price

21. Risk Factors
● Economic risk
○ High dependence on Americas segment
○ Increasing dependence on international markets
● Market risk
○ Fluctuation of ingredient prices
● Operating risk
○ Impairment of brand name
○ Intense competition

22. Recommendation (SBUX): BUY
● Current price: $58.76
● Base case: $60.33
● Bear case: $53.72
● Bull case: $69.46

23. Thank you!