1. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 69
Average Upside Potential as of July 31: 12.02%
Starbucks Corporation (NASDAQ:SBUX) is a popular American 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 around the world, Starbucks offers a wide range of products including coffee, handcrafted beverages, fresh food, and consumer products. Its brand portfolio includes Starbucks Coffee, Teavana, and Ethos Water.
With a name that needs no introduction, Starbucks Corporation (NASDAQ:SBUX) is an already dominant player in the global coffee market and the market share leader in the United States. The company has unlocked an extensive brand reputation for itself by effortlessly delivering a personalized experience in over 36,000 stores globally. The future for the firm’s growth remains bright as it plans to become truly global by expanding at an average of eight stores per day to a network of 55,000 stores by 2030. Alone in the large Chinese market where it has over 6,800 stores in 800 cities, the firm remains on track to run 9,000 stores by 2025. Starbucks Corporation (NASDAQ:SBUX) is also spreading across fast-growing markets such as India, Southeast Asia, and Latin America.
The distinctive experience for customers remains a core strength for Starbucks. Complying with the modern-day needs for convenience, the firm has also shifted from being a public space to a business that thrives more on its mobile app and drive-thru orders. To enable an even better customer experience, the firm has been investing in more purpose-defined stores other than leveraging its tech capabilities of Deep Brew AI and machine learning. Starbucks Corporation (NASDAQ:SBUX) is profitable as it has been capable of growing its revenue by 8.86% and its net income by 39.09% over the last decade. The company’s Reinvention plan which was launched in September 2022 with the goal of accelerating its long-term growth has also produced results through fiscal 2023 with a rise in consolidated net revenues by 12% to a record $36 billion.
In short, Starbucks Corporation (NASDAQ:SBUX) falls among the top coffee stocks to buy now. The company has a lot to offer in terms of a global and resilient brand equity, robust store network, and endless growth opportunities as one of the largest coffee houses in the world. Despite the challenges in the macro environment such as economic volatility impacting customer traffic or lower occasional customers as faced during the recent quarter, the firm is poised to capture a larger market on a global level. The stock was held by 69 hedge funds at the end of the first quarter with stakes worth $2.68 billion. As of March 31, Fisher Asset Management is the largest shareholder in the company with a stake worth $1.06 billion. Analysts are also bullish and see an upside of 12.02%% from current levels.
Diamond Hill Select Strategy stated the following regarding Starbucks Corporation (NASDAQ:SBUX) in its Q2 2024 investor letter:
“Starbucks Corporation (NASDAQ:SBUX) is the global leader in the coffee industry. Given its significant scale, we believe Starbucks can maintain its average ticket growth and drive decent traffic growth, which should allow for some margin expansion. While macroeconomic and competitive pressures remain intense in China, the country accounts for a minimal percentage of today’s earnings, and we believe the current valuation embeds little to no contribution from China over the long term, which we view as too cynical. As the share price declined recently amid near-term concerns surrounding store sales in North America and China, we capitalized on what we considered an attractive entry point.”
While we acknowledge the potential of coffee stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the Cheapest AI Stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
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.
