Bernstein analysts say Starbucks (SBUX, Financials) might be brewing a bold move; selling its China business for as much as $10 billiona step that could help turn things around for the struggling coffee giant.
The potential deal isn’t just about cash; it’s about control. Offloading the China stake would make Starbucks more asset-light; reducing exposure to China’s volatile market, where competition from local brands like Luckin and Cotti has chipped away at market sharedropping it from 42% in 2019 to just 14% in 2024.
Analysts led by Danilo Gargiulo think the proceeds could go a long way; maybe toward reinvestments in the U.S. business, including the company’s Green Apron initiative, or even be returned to shareholders. Either way, Bernstein sees the move as a potential unlock; something that could finally get the stock moving again.
They believe Starbucks might still keep a small stake in the China operations; just enough to benefit from future growth, while letting a local partner chase faster expansion. A $10 billion valuation might be a stretch unless that partner pushes store growth to 15% CAGR; still, even a lower sale could help fund smarter, more focused growth in the U.S.
Bernstein is staying bullish; maintaining an Outperform rating and $100 target. Longer-term? They see the stock hitting $135 in the next three yearsif the strategy pays off.
This article first appeared on GuruFocus.
