This case study is in regards to Starbucks' international expansion strategy. It describes the advantages and risks which may be caused by expansion to Europe
Starbucks Coffee
Overvalued Stock Despite Strong Growth
Prospects
Business Analysis and
Security Valuation
Prepared by Erik Eselius, Jon D. Taylor, Olivier te Boekhorst, and Peter Winters
For Professor Charles Lee
Johnson Graduate School of Management, Cornell University
April 29, 1997
TABLE OF CONTENTS
TABLE OF C 2
EXECUTIVE SUMMARY........................................................................................................................ 3
OVERVIEW OF STARBUCKS............................................................................................................... 4
Business Ove 4
Recent Stock Performance.............................................................................................................. 4
COMPETITIVE ANALYSIS .................................................................................................................... 5
Rivalry Among Existing Firms.......................................................................................................... 5
Threat of New Entrants .................................................................................................................... 6
Threat of Substitute Products........................................................................................................... 6
Bargaining Power of Buyers............................................................................................................. 7
Bargaining Power of …
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…t reach the current $27.50 stockprice. In fact, the prices from
these models ranged from a low of $7.12 to a high of $23.09, as shown below.
Model Conservative Aggressive Best/Average
Estimates Estimates Estimates
Price - Price/Value Price - Price/Value Price - Price/Value
Edward Bell Olson $7.54 - 365% $16.89 - 163% $8.75 - 314%
Discounted Cash Flow $7.12 - 386% $23.09 - 119% $8.52 - 323%
Market Multiples $12.73 - 216% $14.70 - 187% $13.72 - 200%
In light of the above analyses, we are placing Starbucks on our short list.
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