Starbucks was added as a new long at Hedgeye as the company is being transformed under the leadership of CEO Brian Niccol.
“After more than a year under Brian Niccol’s leadership, Starbucks has moved through the heaviest lifting phase of its turnaround,” Hedgeye analyst Bennett Cheer wrote in a note on Sunday. “Labor has been put back into stores. The store portfolio has been reassessed. Corporate complexity has been reduced. Many of the most painful charges and investments now sit behind the company.”
Hedgeye’s Cheer sees specific catalysts that will drive comp acceleration, margin recovery and “renewed confidence in the long-term earnings power of the brand.”
“The Starbucks story is no longer about whether the company can be fixed, but when the investments made over the past year begin to translate into durable comp, margin expansion, and free cash flow recovery,” Cheer added. “Our work suggests that the early innings of that transition are already underway.”
Shares of Starbucks rose 1.7% on Monday and have dropped 6.5% this year.