The recent move on the part of McDonald’s (NYSE:MCD) to bring out a kind of competing platform to Starbucks (NASDAQ:SBUX) might have some investors worried. Indeed, Starbucks is down fractionally in Tuesday afternoon’s trading, despite new assurances from analysts that CosMc, the new McDonald’s spinoff, won’t do much damage to Starbucks’ sales.
The word came from Sharon Zackfia, an analyst with William Blair. Zackfia noted that, yes, CosMc is very much poaching on Starbucks’ turf, offering up customized beverages or quick snacks. However, Zackfia noted that CosMc suffers right out of the gate by going up against a clearly established rival, who has significant advantages of scale as well as expertise. Further, CosMc suffers from a pricing problem. Specifically, its prices for those drinks and snacks really aren’t much better than Starbucks, so it can’t hope to serve as the value competitor. If that had been the case, CosMc likely would have been a much greater threat, especially these days. With all that in mind, Zackfia declared CosMc a “relatively muted” threat.
There’s Further Reasons Why SBUX Investors Should be Reassured
There’s further reasons why SBUX investors should be reassured here. First, Starbucks is taking advantage of the holiday season to offer up free hot chocolate on Saturdays and Sundays throughout December. The move started up on December 9, and will run clear through to December 31. Customers will need to buy a grande-sized drink to get the short-sized hot chocolate at no charge. Plus, Starbucks even stepped up its offerings to include electric vehicle chargers. Yes, five different states in the U.S.—Colorado, Idaho, Oregon, Utah and Washington state—now offer Volvo car chargers right in the parking lot. Any car with a CHAdeMO connector or a CCS1 connector can plug in and power up.
What is a Good Price for Starbucks Stock?
Overall, analysts have a Moderate Buy consensus rating on SBUX stock based on seven Buys and 12 Holds assigned in the past three months, as indicated by the graphic below. After a 2.01% loss in its share price over the past year, the average SBUX price target of $111.33 per share implies 13.57% upside potential.
