Seattle-headquartered Starbucks (SBUX) sells coffee, tea, and food products in cafes and grocery stores as well as online. I am bullish on the stock.
Changes can be scary, but sometimes they’re good and even necessary for businesses to remain competitive. Starbucks is currently going through what might be characterized as a transition phase, but the company’s investors should hang on and stay in the trade.
Without a doubt, investors will be watching closely as Starbucks installs a “new” CEO who isn’t really new to the company at all. They’ll want to know what his priorities are for Starbucks, and how he’ll meet the challenges that so many businesses are facing in 2022.
Rather than fear changes, you can choose to learn all of the relevant facts and make an informed decision about Starbucks stock. So, feel free to sit back and enjoy a warm cup of coffee as we delve into the eye-opening developments happening with Starbucks.
On TipRanks, SBUX scores a 5 out of 10 on the Smart Score spectrum. This indicates a potential for the stock to perform in-line with the broader market.
Good News from Shanghai
Starbucks stock is down from its 52-week high of $126.32, and traded near the $80 level not long ago. This doesn’t mean that it’s time to cut and run, though. If anything, this is only a prime dip-buying opportunity for contrarians and value seekers.
Consider that Starbucks’ trailing 12-month P/E ratio is 21.04, which is quite reasonable and indicates that the share price is justified by the company’s earnings. Hence, value-focused investors ought to have Starbucks on their watch lists.
At the same time, Starbucks offers a forward annual dividend yield of 2.48%. This is a nice bonus to incentivize income-oriented investors to take a buy-and-hold position in Starbucks stock.
Of course, it’s always possible that the share price could keep going down in the short term. On the other hand, Starbucks stock could get a boost soon as the company recently reopened many of its stores in a significant geographic market.
Shanghai, China, has been hit hard by a resurgence of COVID-19 infections in the region this year. It’s been challenging for Shanghai’s businesses as lockdowns have hindered consumer activity. Yet, Starbucks’ business in Shanghai appears to be in recovery mode.
Reportedly, as the Chinese city attempts to ease its lockdown restrictions, Starbucks has reopened nearly 600 of its 940 Shanghai stores. Granted, the majority of the reopened stores are only offering mobile ordering service. Still, Starbucks is apparently working with authorities in the area to gradually resume indoor dining for the customers “as soon as possible.”
“The overwhelming enthusiasm of our partners and customers in Shanghai gives us incredible optimism for the future of the Starbucks brand in China as we continue to inspire and nurture the communities we serve, one cup at a time,” Starbucks reportedly assured.
“New” CEO, but a Familiar Face
It’s fair to say that the reopening of hundreds of Shanghai Starbucks locations isn’t the only interesting development concerning the company lately. Of great significance is the installation of someone in the CEO role who should be quite familiar to folks who know Starbucks’ history.
None other than Starbucks founder, Howard Schultz, is returning as Starbucks’ CEO, and is also taking a seat as a director on the company’s board. Previously as CEO and chairman at the company, Schultz watched Starbucks grow from 11 stores to over 28,000 stores in 77 markets worldwide.
Already, Schultz has signaled big changes for Starbucks. First and foremost, he revealed that Starbucks has suspended its stock repurchasing program. Granted, fans of corporate stock buybacks might not appreciate this move. However, Schultz assured, “This decision will allow us to invest more into our people and our stores — the only way to create long-term value for all stakeholders.”
While Schultz isn’t emphasizing share buybacks, he is focusing on “accelerating our new store growth with 90% of new stores being high-returning drive-throughs.” However, these drive-throughs won’t only be high-returning; in many cases, they’ll also be high-tech.
How so? As Schultz explains, Starbucks’ “newest class of drive-throughs will integrate new store designs, technology, including more handheld devices and equipment improvements that will increase efficiency, speed of service, and, we believe, deliver even greater profitability in the future.”
It will be interesting to see what the “new store designs” and “equipment improvements” will look like in the coming months, if Schultz’s plans pan out as promised. Can Starbucks’ customers look forward to a futuristic coffee-consumption experience?
Wall Street’s Take
According to TipRanks’ analyst rating consensus, SBUX is a Moderate Buy, based on 13 Buy and nine Hold ratings. The average Starbucks price target is $95.05, implying 20.35% upside potential.
The Takeaway
Only time will tell what the new, improved, and tech-enhanced Starbucks customer experience will look like. Schultz has served up some big talk, and now the company has to deliver.
Nevertheless, it’s exciting to consider where Schultz will take Starbucks in the coming months. Perhaps he’s the right leader to take Starbucks to the next level – and if you’re on board with his vision for growth, then feel free to grab a few Starbucks shares while they’re trading at a discount.
Read full Disclosure
