This Beaten-Down Coffee Giant Is Eyeing a Recovery

This Beaten-Down Coffee Giant Is Eyeing a Recovery

By Ethan Goldman, junior analyst, Chaikin AnalyticsDon’t call it a comeback quite yet, folks…

Starbucks (SBUX) is still in dire straits. The coffee giant’s stock is down nearly 14% over the past year.

But its latest quarterly report earlier this week showed signs of a possible turnaround…

Of course, at the helm of this change is none other than Brian Niccol.

Regular readers will recall that in August 2024, Starbucks announced that Niccol would be joining the company as CEO.

And he brought more than just savvy marketing skills…

Remember, Niccol successfully turned around other fast-food names at Yum Brands (YUM). He also got the burrito chain Chipotle Mexican Grill (CMG) back on its feet before he went to Starbucks.

From the day Chipotle announced that Niccol would be joining the company to the day it announced his departure, CMG shares soared an incredible 927%.

It’s easy to see why investors are searching for the first signs of Starbucks’ revival. No one wants to miss more stock gains crafted by Niccol.

So let’s take a closer look today. And we’ll see what the Power Gauge thinks, too…Recommended Links:

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The ‘Smart Money’ Places New Bets on Starbucks’ Stock

On Wednesday, Starbucks reported earnings for the first quarter of its 2026 fiscal year. The company touted year-over-year growth of 3% in net revenue for its North America segment.

Now, the company saw its operating margins and income shrink. Starbucks says that this was due to two factors…

The first was labor investments to support its “Back to Starbucks” plan. You see, Starbucks is putting its money where its mouth is. The company knows it needs to invest in itself in order to change.

And the second factor was inflationary pressures. Starbucks said this was due to higher than usual coffee pricing and tariffs.

To be clear, Starbucks also missed its earnings per share (“EPS”) estimates by about 5% for the quarter.

That said, this was the closest Starbucks came to beating expectations in the past four quarters. And the earnings misses have been shrinking over the past three quarterly periods.

Meanwhile, the Power Gauge has picked up on some changes in the stock. You’ll see what I mean in the chart below…As I said earlier, Starbucks’ stock has been struggling in recent months.

But earlier this month, Starbucks’ relative strength versus the broad market jumped higher. And so did its Chaikin Money Flow – which measures the so-called “smart money” activity on Wall Street. Institutional investors started piling into the stock.

You see, on January 15, Starbucks announced a new goal for its coffeehouses in America. The company said it planned to add at least one “coffeehouse coach” to nearly every U.S. store by the end of the year.

As regular readers will recall, Starbucks customers felt the company had “lost its way”…

In 2024, Bloomberg reported that about 8% of customers waited between 15 and 30 minutes to get their orders. It’s no surprise that those kinds of wait times would drive folks to other options. 

Starbucks’ leadership knew that couldn’t last. The coffeehouse coach is meant to train and support both partners and leaders when they need it most.

The plan to expand this role seems to have excited the smart money on Wall Street. As I said, institutional investors started scooping up Starbucks’ stock in the wake of the announcement. 

It’s the second and largest surge of smart-money buying activity in six months. And thanks to these big investors, Starbucks’ relative strength ticked into positive territory for the first time since last April.

Now, this may sound like Starbucks’ recovery is in its past. But the Power Gauge says that isn’t the case…

Starbucks gets a “neutral-” overall rating in our system right now. This rating happens when a “bearish” or worse stock is trading above its long-term trend line.

Put simply, the Power Gauge has picked up on some positive signs recently. But those aren’t enough to save the stock’s overall rating. Our system still sees plenty of red flags “under the hood.”

Of course, there’s a lot that could go wrong before the stock takes off. But for now, the smart money sees something in part of Niccol’s “Back to Starbucks” plan. 

The Power Gauge says that it’s too early to bet on a full-on recovery just yet. However, I’ll have an eye on Starbucks for some stronger positive signals in our system. Keep the stock on your radar.

Good investing,

Ethan Goldman

Market View

Major Indexes and Notable Sectors  # HLD:    BULLISH    NEUTRAL    BEARISHDow 30

+0.02%719 4S&P 500

-0.2%113263 124Nasdaq

-0.6%2750 29Small Caps

+0.03%631947 311Bonds

+0.02%Communication Services

+2.6%00 0

— According to the Chaikin Power Bar, Small Cap stocks are more Bullish than Large Cap stocks. Major indexes are mixed.*  *  *  *

Sector Tracker

Sector movement over the last 5 daysEnergy+3.27%Communication+3.05%Utilities+1.45%Information Technology+1.37%Materials+0.97%Real Estate+0.56%Industrials+0.22%Consumer Staples-0.17%Financial-0.48%Consumer Discretionary-1.17%Health Care-2.82%*  *  *  *

Industry Focus

Health Care Equipment Services93421

Over the past 6 months, the Health Care Equipment subsector (XHE) has underperformed the S&P 500 by -0.09%. Its Power Bar ratio, which measures future potential, is Weak, with more Bearish than Bullish stocks. It is currently ranked #17 of 21 subsectors and has moved up 1 slot over the past week.Indicative StocksratingAORTArtivion, Inc.ratingZBHZimmer Biomet HoldinratingBAXBaxter International*  *  *  *

Top Movers

GainersratingLUV+18.7%ratingRCL+18.65%ratingMETA+10.4%ratingNCLH+10.25%ratingCCL+8.46%LosersratingLVS-13.96%ratingURI-12.86%ratingFSLR-10.18%ratingMSFT-9.99%ratingNOW-9.94%*  *  *  *

Earnings Report

Earnings SurprisesratingIP 
International Paper Company Q4 $-0.08 Missed by $-0.33ratingDOW 
Dow Inc. Q4 $-0.34 Beat by $0.17ratingWY 
Weyerhaeuser Company Q4 $-0.09 Beat by $0.04ratingHIG 
The Hartford Insurance Group, Inc. Q4 $4.06 Beat by $0.84ratingVLO 
Valero Energy Corporation Q4 $3.82 Beat by $0.55*  *  *  *

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Published by RJ Hamster

I was born on 6 August 1956 in San Francisco, California to Janet and (the late) Richard Hovis. I grew up in Santa Monica, California where I attended elementary, junior high school, and high school (graduating in 1974), in addition to involvement in sports and recreation (Little League +, the Boy’s Club ++). Further, it was in elementary school – St. Augustine’s By-the -Sea Parish School that I found, and made the choice to truly journey with God. I attended Arizona State University from 1974 to 1977 – seeking to become an architect, however, I was not accepted, and, as such, I graduated with a Liberal Arts degree. Upon graduation from Arizona State University, I attended Cal Poly San Luis Obispo and studied City and Regional Planning at the Master’s level. I successfully completed one (1) year in a two (2) year program – I did not complete the Master’s degree in City and Regional Planning – due to personal reasons. I returned to Santa Monica where I started (October 1979) my career as graphic designer with Exxon Company, USA. I spent five years with Exxon Company, USA. While working with Exxon Company, USA I was accepted into architectural school – Sci-Arc in Southern California, however, I did not attend preferring to stay with Exxon.. In 1982 I married Laura Flosi and in April 1983 we had our one and only child – Lauren Alain Hovis – a gift from God. We moved to Phoenix, Arizona in 1984 from Los Angeles, where I went to work as a graphic designer with Kitchell CEM (from 1985 -1987). From 1987 – 1995 I was an independent contractor, and a registered representative in mortgage finance, financial management, graphic design, and drafting. Further, I attended the University of Phoenix and successfully obtained a Master’s in Business Administration (MBA) in 1982. I was also a member of the Scottsdale Jaycees, where I became very involved in community events and projects. In 1994, I accepted a cartography position with the Defense Mapping Agency in Reston, Virginia. As such, I relocated from Phoenix to Reston. In 1998, I was accepted and worked as a Visual Information Officer with the Central Intelligence Agency. In 2002, I worked as a Support Officer until my retirement (due to a need for shoulder surgery) in September 2018. Away from my Federal Government service, I have been involved in various organizations and activities in Northern Virginia. In November of 2011, I married Rebecca Ouellette in Santa Monica, California. I reside in San Tan Valley, AZ with my two hamster - Jess and Timothy, our fish, our lizard - RJ Lizard., and our cats - Pearl and Grey. As to hobbies, I enjoy playing sports, attending sporting events, mentoring individuals from financial management to hamsters, building models, photography, travel, multimedia design, managing partner for RJ Hamster, and jazz – smooth jazz to a samba or a bossa nova. Love and God Bless, Peter – aka RJ Hamster Jo hi

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