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Investing.com - Stifel maintained its Buy rating and $105.00 price target on Starbucks (NASDAQ:SBUX), currently trading at $95.15, as the coffee giant reportedly engages in discussions to sell a stake in its China business. According to InvestingPro data, Starbucks commands a market capitalization of $108.13 billion and trades at a P/E ratio of 34.57, suggesting a premium valuation.
The investment firm noted that multiple reports indicate Starbucks is in active negotiations with potential buyers for a portion of its China operations, suggesting management may soon provide updates on potential partnerships and strategic challenges in the market. The company’s overall financial health is rated as FAIR by InvestingPro, which has identified 8 additional key investment tips for this prominent player in the Hotels, Restaurants & Leisure industry.
Stifel has prepared an analysis of China’s competitive landscape, Starbucks’ market challenges, and financial scenarios for a potential stake sale to help investors prepare for upcoming company discussions on the matter.
Despite the China developments, Stifel emphasized that its primary focus remains on Starbucks’ U.S. turnaround efforts, which it views as the main catalyst for share appreciation over the next 12 months.
The firm added that securing a strategic partner with proven success in China could receive positive investor reaction, as such a move would likely strengthen Starbucks’ ability to gain market share in China’s growing coffee market.
In other recent news, Starbucks has been actively exploring strategic changes and partnerships, particularly concerning its operations in China. The company is reportedly considering selling a stake in its China business, with offers valuing the division at up to $10 billion. Potential buyers include major investment firms such as Centurium Capital, Hillhouse Capital, Carlyle Group (NASDAQ:CG), and KKR & Co. While initially interested in selling a minority stake, Starbucks is now open to selling a controlling stake, depending on valuation and strategic alignment. Stifel has responded to these developments by raising its price target for Starbucks to $105, maintaining a Buy rating, and highlighting the potential benefits of a strategic partnership in China.
Additionally, Starbucks is making changes to its U.S. menu, planning to remove canola oil and introduce new items made with avocado oil to appeal to health-conscious consumers. In another strategic move, Starbucks has granted $6 million in performance-based stock awards to its executives, part of its "Back to Starbucks" strategy. These awards are contingent on meeting specific performance metrics and are designed to align executive incentives with the company’s operational goals. These developments reflect Starbucks’ ongoing efforts to strengthen its market position and operational efficiency.
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