China Eases COVID-19 Policy! Starbucks Stock Rises!

Starbucks Stock Surge Expected as China's Economic Recovery Accelerates

As the global pandemic situation improves to varying degrees, China has rolled out new epidemic-prevention policies. With reopening, work and daily life in cities across China have gradually returned to normal, and economic vitality is coming back. The policy shift has lifted many foreign companies—and coffee chain giant Starbucks is among them. The company was hit hard by repeated pandemic disruptions, but with the recovery underway, analysts see its stock rising again.

Recently, according to Yahoo Finance, Bank of America (BAC) raised its price target on Starbucks (SBUX) from $109 to $125 and reiterated its buy rating to start the new year. Current market data shows SBUX closing at $104.46, up $3.63 from the previous close of $100.83, with a market value of $119.9 billion and a price-to-earnings ratio of 37.04. Its 12-month low was $68.39 and its 12-month high $117.05.

Despite the earlier pandemic setbacks, Starbucks didn't retreat—it kept expanding. As of the end of fiscal Q4 2022, the Seattle-based chain's global store count (company-operated and licensed combined) reached 35,711, up 1,878 from a year earlier. Of those, 6,021 were in China, an increase of 663 year-on-year and far above the roughly 4,700 stores when the pandemic began three years ago. Global revenue rose 11% year-on-year to a record quarterly $8.4 billion.

In the fourth quarter, Starbucks posted earnings per share of $0.81, $0.08 above the consensus estimate of $0.73. Net profit margin came in at 10.18% and return on equity at 39.85%. Analysts predict average EPS of $3.41 for this fiscal year.

The growth momentum is unmistakable. Starbucks China's delivery sales grew 35% year-on-year and now account for 24% of total sales; mobile orders represent 44% of sales. Active Starbucks Rewards membership grew 29% versus the third quarter, recovering past 17 million—close to historical highs.

Starbucks' Aggressive Expansion in China

Expansion in China is still in its early innings. At its Global Investor Conference in September 2022, Starbucks announced a strategic vision for the next three years, launching a value-focused growth plan with a major increase in investment in the Chinese market. By 2025, Starbucks expects 9,000 stores in China—which means opening one store every 9 hours for the next three years.

This rapid expansion means Starbucks' operating revenue swings far more than other food-service chains such as McDonald's (MCD) and Yum! Brands (YUM). Even so, an analyst noted that "Starbucks' operating revenue this year should reach 60% to 70% of pre-pandemic levels, and it will achieve its long-term goals without any problem."

China's Reopening Drives Optimism

Bank of America ties the optimistic outlook largely to China's reopening: people are back at work, consumers are returning to pre-COVID patterns, and greater population mobility means more orders.

As more Chinese consumers build the morning-coffee habit, Starbucks is settling into the role of an accessible "luxury." In China it's positioned as a foreign competitor—priced below GREYBOX and Peet's Coffee but above Costa Coffee, Tim Hortons, and Luckin Coffee. For consumers, it simply occupies the middle of the price ladder.

Image source: Internet

FrontStreet Coffee Recommendation

You don't need a $6 chain latte to enjoy good coffee, though. FrontStreet Coffee suggests these entry-level specialty beans for your own daily brew:

FrontStreet Coffee Ethiopia Yirgacheffe Guodingding (Washed) — jasmine florals, lemon acidity, and berry sweetness with a green-tea finish. Gentle and approachable, the classic first stop for anyone starting a home pour-over routine.

FrontStreet Coffee Brazil Cerrado Red Bourbon — low-acid and balanced with cream, peanut, and cocoa notes. A forgiving daily driver that works as pour-over, espresso, or moka pot coffee—budget-friendly enough to drink every morning.

FrontStreet Coffee Yunnan Arabica 2013 Typica — clean cup with citrus and caramel sweetness over a medium-dark roast base of nut, chocolate, and brown sugar. A domestic option with real Yunnan character, medium acidity, and well-coordinated layers.