Should Starbucks’ (SBUX) $4 Billion China Partnership Prompt a Closer Look From Investors?

• Boyu Capital has entered into talks with Tencent, Singapore’s GIC, and others about joining its planned investment partnership for Starbucks’ China business, following Starbucks’ agreement to sell a majority stake in its China retail operations to Boyu for US$4 billion.
• This move reflects an increased trend among international consumer brands to seek local partners to support operational expansion and adapt to evolving market conditions in China.
• Next, we’ll examine how Starbucks’ broadening labor strikes and the newly announced China joint venture may influence the company’s investment narrative.

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Starbucks Investment Narrative Recap

To own Starbucks today, one needs to believe that a turnaround in core operations and strengthening global partnerships, particularly in China, can help offset recent profit margin pressures. The China joint venture announcement brings new local expertise that aims to support market expansion, but it does not materially alter the company's biggest short-term catalyst: driving operational improvements in store-level execution, nor does it remove the pressing risk posed by ongoing labor disputes in the US.

Among recent developments, the expanded labor strikes impacting over 120 US stores stand out. While Starbucks has maintained operational stability so far, union demands for better pay and staffing coincide with ongoing cost pressures, and the outcome of negotiations could strongly influence both customer experience and near-term margins. Despite resilience in keeping most stores open during labor unrest, investors should be aware of ongoing disputes and cost pressures that could...

Read the full narrative on Starbucks (it's free!)

Starbucks' outlook anticipates $45.5 billion in revenue and $4.6 billion in earnings by 2028. This implies a 7.5% annual revenue growth rate and a $2.0 billion increase in earnings from the current $2.6 billion.

Uncover how Starbucks' forecasts yield a $94.10 fair value, a 11% upside to its current price.

Exploring Other Perspectives

Fourteen members of the Simply Wall St Community estimate Starbucks’ fair value between US$48.91 and US$110. While some focus on the significance of store-level execution and operational improvements, others highlight differences in margin risk and global expansion. Consider multiple viewpoints when assessing potential outcomes for SBUX.

Explore 14 other fair value estimates on Starbucks - why the stock might be worth as much as 30% more than the current price!

Build Your Own Starbucks Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Starbucks research is our analysis highlighting 1 key reward and 5 important warning signs that could impact your investment decision.
• Our free Starbucks research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Starbucks' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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