As far as investors were concerned, it wasn’t good news when recent reports noted that coffee chain giant Starbucks (NASDAQ:SBUX) could be facing an activist investor in the near future. In fact, shares slid over 3.5% in Thursday afternoon’s trading on the news.
The recent movement in Starbucks shares has left some concerned about activists, and not without reason. After a cut in full-year guidance back at the start of May sent shares careening downward, it was likely a bit surprising yesterday to see shares rise 4% at one point. Now, they’re down almost as much today, as word from Don Bilson at Gordon Haskett released a note saying that the chances of an activist investor stepping in are on the rise.
For instance, Pershing Square (OTHEROTC:PSHZF) picked up shares of Starbucks back in 2018, even though it sold them all in 2021. And with former CEO Howard Schultz getting involved, that only increases the chances from there.
Not Enough Focus on ROI
The notion that Starbucks is focusing a bit more on the ESG and not so much on the ROI is certainly within reason. A couple other recent developments point out as much; even as Schultz castigates Starbucks for a lack of customer focus and “coffee-forward innovation,” Starbucks itself is focused on reducing the amount of plastic used in its cups by 20%.
Meanwhile, Florida Attorney General Ashley Moody is looking into an investigation of Starbucks’ diversity, equity, and inclusion (DEI) practices, believing them in violation of state laws against discrimination. While the cups might be considered innovative, it’s a safe bet few customers will even notice the difference.
Is SBUX a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SBUX stock based on seven Buys and 18 Holds assigned in the past three months, as indicated by the graphic below. After a 19.79% loss in its share price over the past year, the average SBUX price target of $87.14 per share implies 11.72% upside potential.
Is SBUX the Right Stock to Buy for Passive Income?
Before you hurry to invest in SBUX, think about the following:
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