Jim Cramer Stocks: 10 Latest Calls

2. Starbucks Corp (NASDAQ:SBUX)

Number of Hedge Fund Investors: 70

Jim Cramer in a latest program said Starbucks new CEO Brian Niccol is a “genius” and he turned around Chipotle.

“If you are looking for what can be saved, you need a big change at the top. Starbucks is going to become the model,” Cramer said.

Starbucks Corp (NASDAQ:SBUX) is in the spotlight after the company poached Chipotle’s CEO Brian Niccol for its own top role.  The stock rose about 20% on the news. While the new CEO cannot turn around the business overnight, what are the reasons behind this optimism?

Brian Niccol is known for success in the industry, including leading Taco Bell and Chipotle. His experience in the Quick Service and Fast Casual formats is expected to bring significant value to Starbucks Corp (NASDAQ:SBUX). Niccol also has a history of turning around the digital side of business.  Chipotle’s digital orders went up from 10-15% to over 40% during his tenure, which consistently boosted revenues and earnings.

Starbucks Corp (NASDAQ:SBUX) is also adjusting its strategy, focusing on coffee innovation and drive-through formats, similar to Dutch Bros. The new textured coffee drinks are likely to be priced competitively, with Niccol’s expertise in digital marketing expected to play a key role in positioning these offerings effectively, just as he did at Chipotle,

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.”