China Eases COVID-19 Policy! Starbucks Stock Rises!

Professional Coffee Knowledge Exchange

For more coffee bean information, please follow the Coffee Workshop (WeChat public account: cafe_style)

For more specialty coffee beans, please add the private WeChat of FrontStreet Coffee, WeChat ID: qjcoffeex

Starbucks Stock Surge Expected as China's Economic Recovery Accelerates

As the global pandemic situation shows varying degrees of improvement, China has introduced new epidemic prevention policies. After opening up, production and daily life in various Chinese cities have gradually returned to normal, and economic vitality has gradually recovered. The optimization of China's policies has also enabled many foreign companies to benefit. Coffee chain giant Starbucks is one of them. The company was previously greatly affected by the repeated pandemic, but with the economic recovery, Starbucks' stock price will rise again!

Recently, according to foreign media Yahoo Finance, Bank of America (BAC) has raised Starbucks' (SBUX) target stock price from $109 to $125 and reiterated its buy rating for the stock to start the new year. Today's stock market data shows that Starbucks (SBUX) stock closed at $104.46, an increase of $3.63 compared to yesterday's closing price of $100.83, with a market value of $119.9 billion and a price-to-earnings ratio of 37.04. Starbucks' 12-month low was $68.39, and the 12-month high was $117.05.

Despite being affected by the pandemic earlier, Starbucks did not retreat but instead continued to expand its business. As of the end of the fourth quarter of fiscal year 22, the total number of global stores (including both self-operated and franchised) of this Seattle-based coffee chain giant reached 35,711, an increase of 1,878 from the same period last year. Among these, China had 6,021 stores, an increase of 663 from the same period last year, a figure far higher than the 4,700 stores at the beginning of the pandemic three years ago. Starbucks' global revenue also increased by 11% year-on-year, reaching a record quarterly revenue of $8.4 billion.

In the fourth quarter, Starbucks reported earnings per share of $0.81, $0.08 higher than the generally expected $0.73. Starbucks' net profit margin was 10.18%, and return on equity was 39.85%. Research analysts predict that Starbucks' average earnings per share for this fiscal year will be $3.41.

It is evident that Starbucks has maintained a very strong growth momentum. Starbucks China's delivery service sales increased by 35% year-on-year, accounting for 24% of total sales. Mobile orders also accounted for 44% of sales. The number of active members in the Starbucks Rewards program increased by 29% compared to the third quarter, recovering to over 17 million, close to historical highs.

Starbucks' Aggressive Expansion in China

Currently, Starbucks' expansion in China is still in its early stages. In September 2022, at the Global Investor Conference, Starbucks announced its strategic vision for the next three years, launching a new growth plan focused on value and significantly increasing its investment in the Chinese market. It is expected that by 2025, Starbucks will have 9,000 stores in China. To achieve this goal, it will open a store in China every 9 hours over the next three years.

This rapid expansion has caused Starbucks' operating revenue to be affected far more than other food service chains such as McDonald's (MCD) and Yum! Brands (YUM). However, a senator stated that "Starbucks' operating revenue this year should reach 60% to 70% of pre-pandemic levels and will achieve its long-term goals without any problem."

China's Reopening Drives Optimism

Bank of America believes that this optimistic outlook is largely related to China's reopening. There is evidence that people are returning to work, consumers are returning to pre-COVID patterns, and with increased population mobility, Starbucks will receive more orders.

As more and more Chinese consumers become accustomed to drinking coffee in the morning, Starbucks is gradually being seen as an accessible "luxury" in China. In China, Starbucks is considered a foreign competitor, priced cheaper than coffee brands like GREYBOX and Peet's Coffee, but more expensive than Costa Coffee, Tim Hortons, and Luckin Coffee. For consumers, this might just be a pricing point that sits between the two.

Image source: Internet

Important Notice :

前街咖啡 FrontStreet Coffee has moved to new addredd:

FrontStreet Coffee Address: 315,Donghua East Road,GuangZhou

Tel:020 38364473