Recently we took a detailed look at the Top 10 Trending Stocks and Starbucks Corporation (NASDAQ:SBUX) was one of the stocks that were highlighted in that article.
The volatile tariff policies of the new US administration and a slowdown in AI-related enthusiasm took a toll on the market over the past few weeks. However, some analysts believe a rebound is due.
Fundstrat’s Tom Lee said in a latest program on CNBC that he believes the US stock market will begin to recover starting April 2. Here is how Lee explained the reasons behind his positive outlook:
“When markets fall this quickly from a 52-week high, just remember less than a month ago we were at all-time highs. That is a market pricing in a crisis. I’d say almost 50% pricing in a recession, and we’re assuming there’s no Fed put now. The Fed is in a position to cut rates that really should mitigate the downside. I do think two other things that investors have to keep in mind, because many people just want to get out until April 2nd, is number one, I do think there’s a very high probability that a tariff solution happens before the next three weeks happens. It’s simple to see because China, Europe, Canada, Mexico since April 18th—all of those countries have outperformed the US. I don’t think that markets are that blind to say if Canada and Mexico are about to have a recession, they should outperform the US. The second thing people should keep in mind is that when you have a global crisis brewing—and we highlighted like the 1962 Cuban Missile Crisis—that was a 12-day crisis, but the markets bottomed seven days into the crisis, five days before that crisis ended, the market had already recovered two-thirds of the losses.”
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For this article, we picked 10 stocks notable Wall Street analysts were discussing recently. With each stock we have mentioned its latest hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A barista pouring freshly brewed coffee from an espresso machine to a cup in a bustling cafe.
6. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Funds Investors: 76
Near the end of December last year, Josh Brown, CEO of Ritholtz Wealth Management, said during a program on CNBC that he was expecting a turnaround in Starbucks Corporation (NASDAQ:SBUX) stock price amid a variety of factors. Here is how he made the bull case for the coffee giant at that time:
“This stock being down three years in a row is a pretty rare thing. You don’t really see that very often, and quite frankly, it’s understandable why. But it’s also understandable why things should be changing very quickly. They’re going to report earnings on January 28th, so you don’t have to wait a long time to see if the turnaround can be trusted. They’re going to do 9 billion in revenue, which would be down 1% year-over-year, about 1.1 billion in EBIT, which would be down 23% year-over-year. So analyst’s expectations are extremely low. The stock is effectively trading at its 10-year median valuation on all the important measures. And they just hired arguably the best living QSR industry CEO in Brian Niccol, who’s going to turn this thing around. So I like the risk-reward here, and if it gets into the low to mid-80s, I’m going to add an irresponsible amount of stock to my own portfolio. Because anytime Starbucks has been down, it’s never been out. It’s always been an opportunity, and I don’t think that’s changed this time.”
SBUX shares are up 7% so far this year.
The Street is turning bullish on SBUX amid its new CEO Brian Niccol. Why? He has a solid history of turning around businesses. Bill Ackman brought Niccol to Chipotle Mexican Grill from Yum! Brands to turn the company around. Ackman sold his stake in Chipotle in the second quarter of 2024, just before Niccol transitioned to Starbucks. During Niccol’s tenure, Chipotle shares rose 700%.
Invesco Growth and Income Fund stated the following regarding Starbucks Corporation (NASDAQ:SBUX) in its Q3 2024 investor letter:
“Starbucks Corporation (NASDAQ:SBUX): The coffee retailer has struggled with China’s economic softness, declining sales and weaker US store traffic that have hampered revenues and profit margins. However, we believe the company has several positive, long-term catalysts, including strong growth in store count, better labor relations, improving productivity from labor, technology and innovation, and easier future earnings comparisons. We believed a management change was imminent, and shortly after we purchased the stock, Starbucks named a new CEO, which was seemingly greeted enthusiastically by investors.”
SBUX ranks 6th among our list of the top 10 trending stocks. While we acknowledge the potential of SBUX, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SBUX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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