12. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Investors: 70
Jefferies downgraded Starbucks Corporation (NASDAQ:SBUX), a Club name, from a “hold” to an “underperform” (sell) rating. The analysts are skeptical about the impact of the new CEO, Brian Niccol, formerly of Chipotle Mexican Grill, Inc. (NYSE:CMG), and believe Starbucks Corporation (NASDAQ:SBUX)’s recent gains since his appointment are excessive. They also expect a reset to Starbucks’ fiscal 2025 guidance. However, The latest Morning Thoughts post stated that Jefferies might be overlooking the market’s patience with Starbucks Corporation (NASDAQ:SBUX) as Niccol builds his leadership team and implements changes.
“Club name Starbucks was downgraded to an underperform sell rating from hold at Jefferies. The analysts don’t seem to be believers in new CEO Brian Niccol, the former boss of Chipotle. They characterized the stock gains since the CEO switch as too much, too soon. They think a reset to Starbucks fiscal 2025 guide is coming. What the Jefferies downgrade misses is the market is giving Starbucks a pass as Niccol builds his team and makes changes.”
Starbucks Corporation (NASDAQ:SBUX) stands out as a strong investment opportunity due to its solid financial performance and clear growth strategies. In its Q2 2024 earnings report, Starbucks Corporation (NASDAQ:SBUX) revealed a revenue of $9.2 billion, driven by new store openings and impressive same-store sales growth of 11%. This resulted in a net income of $1.3 billion, reflecting effective cost management and increased customer visits.
Starbucks Corporation (NASDAQ:SBUX) is focusing on expanding in key markets like China, where it plans to open over 1,200 new stores in the next five years to tap into the rising coffee culture. Starbucks Corporation (NASDAQ:SBUX) loyalty program, which now has over 30 million members in the U.S., plays a crucial role in encouraging repeat business and boosting sales.
Moreover, Starbucks Corporation (NASDAQ:SBUX) is committed to innovation by introducing seasonal drinks and expanding its plant-based menu to meet changing consumer preferences. Starbucks Corporation (NASDAQ:SBUX) is also prioritizing sustainability, aiming to reduce waste and invest in renewable energy to become more resource-positive.
Recently, Starbucks Corporation (NASDAQ:SBUX) formed a partnership with a major delivery service to enhance convenience for customers, aligning with the growing trend of online ordering. Overall, with its strong financial health, strategic expansion plans, innovative product offerings, and dedication to sustainability, Starbucks Corporation (NASDAQ:SBUX) is well-positioned for ongoing growth, making it an appealing investment option.
Mar Vista Strategic Growth Strategy stated the following regarding Starbucks Corporation (NASDAQ:SBUX) in its Q2 2024 investor letter:
“Our decision to divest from Starbucks Corporation (NASDAQ:SBUX) followed their latest earnings report, which highlighted concerning business trends. The primary issue was sluggish demand, with comparable store sales dropping in their important U.S. and Chinese markets. American consumers, grappling with inflation, are reducing non-essential expenses, including regular coffee shop visits.
Meanwhile, China’s economic rebound, vital for Starbucks’ growth, has been underwhelming. These challenges led Starbucks to downgrade its annual financial projections, raising doubts about leadership’s capacity to address immediate headwinds. Faced with lowered financial expectations, persistent demand challenges, and a deteriorating economic landscape, we opted to liquidate our investment.”
