present value and add up all the results
to perpetuity. The sum of all those cash
flows is the total value investors are
willing to pay for the company’s equity.
In the case of Starbucks, our total
valuation is $94.2 billion. Divide that
number for the amount of stocks
outstanding in the market at the
moment and so you get your target
price. The target price we believe the
company is worth is $64.65 per share.
As you may have noticed by now, that
is not the company’s stock price in the
market at the moment (03/10/2017).
As matter of fact, Starbucks’ stock price
at the time this article was written was
$54.53 per share. That means that we
believe the company’s stock price is
going to increase more than $10 (or
18.62%) in the next twelve months as
the market adjusts the price to its “fair
value”. So go ahead and start investing
your own money in the things that you
know and love.
Starbucks: A Growth Story