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Investing.com - Stifel raised its price target on Starbucks (NASDAQ:SBUX) to $105.00 from $92.00 on Friday, while maintaining a Buy rating on the coffee chain’s stock. The new target represents potential upside for the $108 billion market cap company, which currently trades at a P/E ratio of 34.5x and offers a 2.56% dividend yield.
The investment firm cited reports indicating Starbucks is in active discussions with potential buyers for a stake in its China business, suggesting management may soon provide an update on potential partnerships and strategic challenges in the market.
Stifel prepared an overview of China’s competitive landscape, Starbucks’ market issues, and potential financial scenarios for selling a stake in the business to help investors prepare for upcoming discussions.
The firm emphasized that the U.S. turnaround remains the primary catalyst for share appreciation over the next 12 months, despite the China developments.
Securing a strategic partner with a strong track record in China could be well received by investors, according to Stifel, as it should enhance Starbucks’ ability to gain market share in a growing region.
In other recent news, Starbucks Corporation is considering selling a controlling stake in its China business, with several investment firms, including Centurium Capital and Hillhouse Capital, expressing interest. The company is evaluating proposals and may share operational details with shortlisted bidders. Although Starbucks initially preferred selling a minority stake, it is now open to selling a larger portion due to valuation considerations. In the United States, Starbucks plans to remove canola oil from its food menu, opting for healthier alternatives like avocado oil as part of a brand revamp. The company aims to attract health-conscious customers and align with health priorities discussed with US Health and Human Services Secretary Robert F. Kennedy Jr. Additionally, Starbucks has granted $6 million in performance-based stock awards to its executives, contingent on meeting targets like reducing operating expenses and enhancing customer service programs. The company also announced the appointment of Dr. Dambisa Moyo and Marissa Mayer to its board of directors, bringing expertise in technology and global affairs. These developments are part of Starbucks’ broader strategy to revitalize its operations and align with long-term growth objectives.
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