7. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Investors: 70
Jim Cramer discussed the possibility of Starbucks Corporation (NASDAQ:SBUX) adopting a “China Lite” strategy under its new CEO, Brian Niccol. According to Bank of America, this approach would be beneficial. Analysts raised their price target for Starbucks Corporation (NASDAQ:SBUX) shares from $112 to $118, suggesting that if the company focuses on licensing stores in China instead of owning them, it could enhance returns and increase the stock’s value.
“Will Starbucks adopt a so-called China Lite strategy under new CEO Brian Niccol? Bank of America says it should, at least. Analysts upped their price target on the Club holding to $118 a share from $112. Licensing stores in China instead of the company owning them would boost returns and the stock’s multiple, analysts said.”
Starbucks Corporation (NASDAQ:SBUX) has shown strong financial growth in Q2 2024, with a 15% increase in revenue to $9.2 billion and a 12% rise in same-store sales. This success is due to higher average prices and more customers, especially internationally, resulting in a net income of $1.4 billion. Starbucks Corporation (NASDAQ:SBUX)’s digital sales now account for 25% of total revenue, highlighting the effectiveness of its loyalty program and mobile app.
Starbucks is also expanding globally, particularly in China, with plans to open 2,000 new stores by 2025, which is crucial for future growth. Starbucks Corporation (NASDAQ:SBUX) commitment to sustainability, aiming to be resource-positive by 2030, appeals to eco-conscious customers. Strong brand loyalty and ongoing innovation in products and store experiences enhance Starbucks Corporation (NASDAQ:SBUX) competitive advantage.
Despite market ups and downs, analysts are optimistic about Starbucks Corporation (NASDAQ:SBUX) stock, seeing significant growth potential due to its solid valuation. Recent product launches and a focus on diversity and inclusion underline its dedication to community engagement, making it an attractive investment opportunity.
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.”
