Starbucks: A Premium For This Stock? No Thanks.

Summary:

  • I’m initiating Starbucks with a sell rating, as the stock has soared to unsustainable premiums in the wake of Brian Niccol’s hiring as CEO.
  • Declining comparable sales and weak international performance, especially in China, underscore Starbucks’ weak competitive positioning and operational challenges.
  • The chain also lags behind many fast-food and restaurant peers in automation, which could be a long-term solution to the company’s declining operating margins.
  • Investors should consider selling Starbucks at $95 and look for better opportunities to buy back in the future.
Starbucks coffee sign hanging outside a shop

JohnFScott

With the S&P 500 continuing to soar toward new all-time highs, the core question for investors to answer now is: how can we position our portfolios to cushion for a potential fall? Though it’s true that lower interest rates provide for less competition


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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