(C) Reuters. Can Starbucks Stock Heat up Again?
Starbucks (NASDAQ:SBUX) stock has been under considerable pressure lately.
This comes courtesy of an update from Yum China (YUMC), which pointed to renewed COVID-19 Delta variant fears that could cause profits to fall 50% to 60%. YUMC stock tumbled nearly 6% on the news.
Undoubtedly, China has been a major source of growth for Starbucks, the Seattle-based coffee chain.
Still, Starbucks has made it through COVID-19 headwinds before, and it will likely heat up again after it passes through another wave of headwinds.
Given Starbucks’ momentum prior to the bad news, and the likelihood that the Delta-induced impact is now baked into the share price, I remain bullish on SBUX stock, as shares flirt with a correction. (See SBUX stock charts on TipRanks)
The latest update from Yum China doesn’t bode well for Starbucks, as it looks to cap off the year.
Regardless, the long-term thesis on China remains intact. Starbucks is positioned to become a dominant force in China for many years, if not decades, to come as it benefits from the nation’s rapidly-rising middle class.
This is a secular tailwind that takes many years to play out, and near-term headwinds are unlikely to derail it.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, SBUX stock comes in as a Moderate Buy. Out of 17 analyst ratings, there are 12 Buy recommendations, and five Hold recommendations.
The average SBUX price target is $132.14. Analyst price targets range from a low of $108 per share, to a high of $145 per share.
A majority of analysts remain bullish on SBUX stock. This could change, as analysts factor in a China slowdown into the equation.
Over the coming weeks, expect some analysts to follow in the footsteps of YUMC analysts, with a downgrade on Buy ratings, price targets, or both.
Such downgrades could further pressure the stock, and provide a compelling entry point for long-term thinkers who want to profit from longer-term tailwinds.
Disclosure: Joey Frenette owned shares of Starbucks at the time of publication.
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Can Starbucks Stock Heat up Again?
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