Starbucks (NASDAQ: SBUX) announced today that it plans to ditch its disposable cup program. They plan to completely eliminate single-use paper and plastic cups by 2025.
The news surfaced ahead of the company’s annual shareholder meeting, as ESG mandates become a priority for publicly-traded companies.
Starbucks has continued to put sustainability at the forefront of its mission, and has set aggressive sustainability targets. Former CEO, Kevin Johnson, outlined three preliminary targets in its 2020 sustainability goals. By 2030, Starbucks aims to reduce carbon emissions by 50%, reduce waste sent to landfills by 50%, and conserve 50% of its water.
The company has also introduced a new program called ‘’Borrow A Cup.’’ This program aims to promote sustainability by allowing customers to bring their own cups, or ‘’borrow a cup.’’ This will put the oneness onto the customers, to further advance Starbucks sustainability goals by reducing overall waste.
Company Outlook
JP Morgan lifted its rating today from neutral to overweight, with a $101.00 price target.
“Starbucks is the single most difficult stock call in our coverage. The valuation supports more upside than downside. While the catalyst for near-term movement is elusive, investors should allow for mean-reversion and valuation to drive stock outperformance,” Ivankoe said in a statement.
Starbucks is down more than 23% YTD, as The Federal Reserve prepares to hike interest rates by 25 basis points today.
Rising inflation has put significant pressure on its business over the last 12 months. This has led to many retailers raising prices to keep up with inflation.
What’s Next for Starbucks?
The stock has faced pressure from many angles, as inflation and a resurgence of Covid-19 in China weigh on the company’s business. In Q4 2021, Starbucks same-store sales fell by 14% in China. The company missed on EPS estimates, as higher costs put pressure on profits. EPS came in at $0.72 per share, vs. $0.80 per share estimated.
Short term supply chain bottlenecks and higher costs may continue to put pressure on Starbucks business in 2022. However, Starbucks has great long term growth prospects as the global economy recovers from pre-pandemic levels. With the stock down more than 23% YTD, now might be a great time to initiate a position.
Disclosure: The author holds no position mentioned in this article. Freedom Stocks has a disclosure policy.
