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Starbucks Stock Could Prosper After the Pandemic

Starbucks Corporation (SBUX) is better positioned than most rivals to survive and prosper once the coronavirus pandemic runs its course. Many stores in China have reopened, giving the company a steady income stream while U.S. and European stores without drive-thru or delivery capacity have closed. It’s likely that revenues at coffee houses that are still open have taken a big hit due to dependence on rush-hour traffic that has trickled to a standstill in many cities and towns.

The company reported over $3.5 billion in net income for the fiscal year ending Sept. 30, 2019 (See also: How Starbucks Makes Money.) Nearly 70% of outstanding shares are owned by big institutions that shouldn’t need to sell in order to raise cash during the crisis. In addition, the stock is still trading above the 2018 low, highlighting resilience that is rare for the vast majority struggling restaurants and coffee houses.

The misfortune of rivals will also help Starbucks in coming quarters, with the likelihood that small competitors will go bankrupt. However, the sword can run both ways because regional operators like Dutch Brothers have used drive-through exclusively for years, allowing them to build income and customer loyalty during the crisis. It’s possible that market share for these companies will increase permanently as consumers discover delicious blends at lower prices.

SBUX Long-Term Chart (1992 – 2020)

SBUX Short-Term Outlook

The Bottom Line

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