Starbucks: What Drove Its Stock Price on October 9?



Starbucks’s stock performance

On October 9, CNBC reported that Bill Ackman of Pershing Square Capital revealed that the fund has bought 15.2 million shares in Starbucks (SBUX) worth ~$900 million. The news appears to have excited investors. Starbucks stock increased to a high of $59.70 on October 9 before closing at $57.71, which represents a rise of 2.1% from the previous day’s closing price.

Pershing Square Capital has also invested in Chipotle Mexican Grill (CMG), Restaurant Brands International (QSR), and Mondelez International (MDLZ) in the food and beverage sector. The fund is the second-largest shareholder of Chipotle with a stake of ~7.4% as of June 30.

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YTD stock performance

Since the beginning of 2018, Starbucks’s stock price has increased 0.5%. The company has been struggling with its sales in the last few quarters, which has been putting pressure on its stock price.

In the last quarter, which ended on July 1, Starbucks’s SSSG (same-store sales growth) in China declined 2.0% after increasing 7% in the same quarter the previous year. Management blamed stricter regulations and the crackdown on unauthorized third-party delivery services for the decline. In order to address the delivery issues, Starbucks has partnered with Alibaba (BABA) to start delivery services in China. As a pilot project, Starbucks started the delivery service at 150 restaurants in Beijing and Shanghai in September. The delivery service will expand to 2,000 restaurants across China by the end of the year.

Dunkin’ Brands (DNKN) and McDonald’s (MCD) have returned 13.9% and -1.3%, YTD (year-to-date), respectively. Meanwhile, the broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests 8.1% of its holdings in restaurant and travel companies, has returned 13.7% during the same period.

Next, we’ll discuss analysts’ recommendations.


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