Good news hit for coffee giant Starbucks (SBUX), as word emerged about the Starbucks China business. A new frontrunner has emerged, suggesting that Starbucks will sell a substantial part of its total operations in fairly short order. But investors were concerned and sent shares down fractionally in Tuesday afternoon’s trading.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Boyu Capital is currently the frontrunner to buy Starbucks’ Chinese operations, reports note. It has reportedly outbid several other competitors so far, and the current transaction is running around the $4 billion mark. Though a deal is likely still at least a few months out, as Starbucks and Boyu will need to work out a few key details on terms and final negotiations.
Neither Starbucks nor Boyu commented on the deal, and there are some signs that other companies may step in to buy smaller stakes as well. This might hurt Starbucks’ long-term returns, but would provide a substantial slug of cash that Starbucks would likely need as it continues a rebuilding plan in the United States. But with China currently serving as Starbucks’ second-largest market, any move here takes on an importance all its own.
The Latte Effect
Remember when the “latte effect” was a big thing? How, basically, the thing that was keeping you broke was the fact you were regularly buying lattes at Starbucks? Apparently, the notion is making a comeback thanks to remarks from the Corcoran Group.
Corcoran Group CEO Pamela Liebman noted that Gen Z members apparently have a much simpler plan available to them to buy a house. Liebman notes that Gen Z needs to pass on the Starbucks, take public transportation instead of using ride-sharing services, and cut back on unnecessary expenses in general. This combination will, somehow, be enough for Gen Z to afford home ownership again. Given that the median price for a Manhattan property is $1.2 million, it is hard to conceive of how many rides and lattes would equal that.
Is Starbucks Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SBUX stock based on 13 Buys, seven Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 10.44% loss in its share price over the past year, the average SBUX price target of $99.16 per share implies 14.31 % upside potential.
