Shares in coffee chain Starbucks (SBUX) frothed up today despite slashing prices in China to fend off more intense competition.
Don’t Miss TipRanks’ Half-Year Sale
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
Accessible Drinks
SBUX stock was up 0.3% in pre-market trading as it announced in a post on its Weixin social media account that it would offer more “accessible” prices on dozens of its drinks.
As a result it lowered prices on drinks, such as non-coffee tipples and the Frappuccino, by an average of around 5 yuan or $0.70 across China. This brings those drinks to around 23 yuan.
The move was made to see off the growing threat from domestic rivals including Luckin Coffee and Cotti, which have priced their drinks as low as 9.9 or even 8.8 yuan. Internet giants such as JD.com (JD) and Alibaba (BABA) have also entered the fray as part of their food delivery offerings.
Starbucks has also cut prices in response to customers becoming more cautious about their spending as the economy slows.
Crucial China
China is important to Starbucks as it is its second-largest market outside of the U.S. with around 8,000 stores. In its most recent second-quarter results Starbucks reported a 5% lift in net revenues in China to $739 million. However, same-store sales were flat during the period.
According to Reuters, Starbucks said the reduction in prices was not in response to competition but to attract more customers during the afternoons.
However, there have also been reports that Starbucks is considering its options in China reaching out to private equity and tech firms over a potential sell-off.
Starbucks’ share price has dropped around 10% over the last 6 months hit by concerns over tariffs hiking coffee prices. However, investors are still hopeful of a turnaround under new CEO Brian Niccol who joined the group last September.
Is SBUX a Good Stock to Buy Now?
On TipRanks, SBUX has a Moderate Buy consensus based on 12 Buy and 10 Hold ratings. Its highest price target is $115. SBUX stock’s consensus price target is $93.68 implying a 4.51% upside.

.