Granted, coffee giant Starbucks (SBUX) is probably best associated with Seattle. But its presence in New York is nothing to sneeze at. But there is a growing movement away from Starbucks toward one competitor in particular that seems to be focusing everywhere Starbucks is not. The move away from Starbucks in New York does come with some problems, and shares were down fractionally in Thursday afternoon’s trading.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 55% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
The current thorn in Starbucks’ collective side is Luckin Coffee (LKNCY), a Chinese brand that focuses on getting drinks out the door. Customers are required to order by phone, a move that Starbucks seems to be pulling away from. And Luckin also seems to be resonating with the younger New Yorker, as evidenced by Ari Birnbaum, an 18-year-old Upper West Side resident who drove nails into Starbucks’ coffin with a series of two-word phrases. “It’s different. It’s cool. It’s sleek.”
Luckin Coffee has about 26,000 stores worldwide. Most of them are in China, reports note. But they are expanding outward, and delivering on a combination of high-speed service, inventive drink flavors, and bargain pricing via a series of discounts. One of the newest Luckin Coffee outlets opened up near Greenwich Village, about a block away from a Starbucks’ former location, closed almost a month prior.
“We’re Bleeding”
Worse yet, Starbucks suppliers are having a particularly rough time of things themselves. Thermoplan CEO Adrian Steiner noted that various tariffs from the United States are costing the company about a quarter-million dollars weekly. Steiner revealed, “We’re bleeding. It’s obviously a losing business for us. We don’t have the kind of margins to compensate for that.”
Thermoplan is also a major Starbucks supplier, thanks to its line of coffee machines. Starbucks agreed to chip in, splitting the new costs with Thermoplan, but the end result is still the same: a lot more expense for the same material.
Is Starbucks Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SBUX stock based on 14 Buys, eight Holds and two Sells assigned in the past three months, as indicated by the graphic below. After a 4.71% loss in its share price over the past year, the average SBUX price target of $100.68 per share implies 15.67% upside potential.
