SBUX - Starbucks: I Finally Bought This Coffee King
2024-05-22 09:14:14 ET
Summary
- Starbucks is experiencing a major post-earnings pullback, with the stock dropping nearly 40% from its high.
- Dutch Brothers, a competitor, is selling at a higher valuation than Starbucks despite being less profitable. I would be more excited about the re-rating of the bigger brand.
- Starbucks is facing challenges in China, with declining same-store comp sales and a lack of foreign influence affecting its business.
- The joint venture with TATA to open 1,000 Starbucks stores in India by 2028 could be the next leg of the growth story.
A major post earnings pull back
Back in 2023,
I wrote an article surmising that a recessionary environment where the consumer would have to tighten their wallet may benefit inferior products like J.M. Smucker's(SJM) Folgers brand. I believed Starbucks (NASDAQ: SBUX ) was overpriced for the growth rate the market was expecting which also hinged on a China expansion strategy. Since that article, Starbucks has finally dropped into a buy zone. I still believe I am paying a premium price for the brand name versus a realistic current valuation, but I am willing to pay a Starbucks: I Finally Bought This Coffee King