Starbucks (NASDAQ:SBUX) is likely to face troubles in China. The company’s plans to increase its presence in China could be hampered by the country’s escalating competition from domestic and foreign coffee suppliers.
In September 2022, the company announced its aim to reach about 9000 stores in China by 2025 and a $130 million roasting plant this year in Kunshan city.
However, a number of other regional rivals, such as Tim Hortons, Manner Coffee, and Luckin Coffee (LC0A), among others, have their eyes on this expanding coffee market in China. These regional suppliers are also launching new products in an effort to gain market share. Furthermore, they offer coffee at a much lower price than Starbucks, which might trigger a price war soon.
Moreover, Starbucks recently underwent a leadership change. The new CEO, Laxman Narasimhan, took over the reins from interim CEO Howard Schultz on March 20, about two weeks sooner than planned.
China’s weak sales are likely to be Narasimhan’s biggest issue at hand. In the first quarter earnings, the company reported a 29% drop in comparable-store sales in China, citing a spike in COVID infection as the key reason.
Is Starbucks Stock a Buy, Sell, or Hold?
Turning to Wall Street, SBUX is a Moderate Buy, based on 10 Buys and 10 Hold ratings. The average Starbucks stock price target is $115.50, implying 16.5% upside potential.
