Starbucks’ Rally Surrounding New CEO May Not Last – Reiterate Hold

Summary:

  • It goes without saying that the “lush [compensation] package” for SBUX’s new CEO comes with great expectations, with it uncertain how Brian Niccol may deliver outsized results.
  • Investors should monitor the new CEO’s strategies and upcoming FQ4’24 earnings call for potential restructuring/ capex/ operating expense impacts.
  • While SBUX has previously highlighted that “China is expected to be our fastest growing market in terms of percentage growth,” things are no longer the same as local competition intensifies.
  • This is on top of the deteriorating balance sheet and the management’s previously lowered FY2024 guidance, with any headwinds potentially moderating much of the stock’s recent gains.
  • Combined with SBUX’s expensive FWD PEG non-GAAP valuations of 2.57x, we believe that it may be better to be prudent and observe the new management’s execution.

Man must decide his way forward to success or failure

mikkelwilliam

SBUX’s Reversal Remains Speculative Despite The New CEO

We previously covered Starbucks (NASDAQ:SBUX) in November 2022, discussing why we had rated the stock as a Hold then – attributed to its premium valuations and the minimal margin of safety.


Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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