1. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 76
Starbucks Corporation (NASDAQ:SBUX) is a renowned American multinational chain of coffee houses. The coffee giant started off from a single store in Seattle’s Pike Place Market in 1971 and currently serves as the premier roaster and retailer of specialty coffee globally. With coverage in more than 80 markets, Starbucks offers a wide range of products including coffee, handcrafted beverages, fresh food, and consumer products.
Starbucks Corporation (NASDAQ:SBUX) is a dominant player in the global coffee market and the market share leader in the United States. Starbucks stores in the U.S. and China comprised 61% of the company’s global portfolio, with 16,941 and 7,596 stores in the U.S. and China respectively, at the end of Q4. The company has unlocked an extensive brand reputation for itself by effortlessly delivering a personalized experience in 40,199 stores globally.
Starbucks Corporation (NASDAQ:SBUX) is currently fighting its battle against challenged customer behavior. The firm saw declining global comparable store sales and consolidated net revenues as it closed its fourth quarter of fiscal year 2024. The overall fiscal year marked a lower-than-expected performance, driven by the pronounced traffic decline, a cautious consumer environment, and the firm’s accelerated investments in an expanded range of product offerings and more frequent in-app promotions not improving customer behaviors, in addition to China’s competitive as well as soft macro environment that impacted consumer spending in China.
To cater to the aforementioned issues, the management is developing a solid plan to revive growth for the brand. Reiterating Starbucks’ strength and the new plan, Brian Niccol, chairman and chief executive officer stated
“Our fourth quarter performance makes it clear that we need to fundamentally change our strategy so we can get back to growth and that’s exactly what we are doing with our ‘Back to Starbucks’ plan. I’ve spent my first several weeks in stores engaging with and listening to feedback from our partners and customers. It’s clear that Starbucks is a much-loved brand. We need to focus on what has always set us apart — a welcoming coffeehouse where people gather and where we serve the finest coffee, handcrafted by our skilled baristas”.
Regardless of the current challenges, Starbucks Corporation (NASDAQ:SBUX) has a lot to offer in terms of global and resilient brand equity, robust store network, and endless growth opportunities as one of the largest coffee houses globally.
While we acknowledge the potential of SBUX as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than SBUX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
