Starbucks shares have fallen over 20% this year after quarterly earnings missed market estimates, but South Korean retail investors are actively buying Starbucks shares, with hopes that the coffee giant’s shares will rebound from its current low.
The U.S. coffee chain’s stock price dropped 20.7% from $96.01 per share at the end of last year to $76.11 per share on May 10, according to Nasdaq on May 14. Starbucks shares plunged more than 16% on April 30, the day the company reported weaker-than-expected first-quarter earnings. Starbucks said revenue fell 1.8% to $8.56 billion in the three months that ended March 31 as store traffic slowed around the world. Net earnings decreased 15% to $772.4 million during the same period.
Some experts liken Starbucks’ recent earnings and share downturn to the situation the coffee giant faced during the global financial crisis in 2007-2008. At the time, Starbucks was focused on expanding its presence to the extent that a Starbucks store could be found every 100m in New York City. While this boosted global sales, same-store sales only grew by 5%. The number of customers per store increased by only 1%. The coffee served at Starbucks was criticized for tasting worse than those offered at fast food chain McDonald’s. As the U.S. subprime mortgage crisis hit the global economy, Starbucks shares plummeted 42%.
But Korean retail investors who invest in foreign stock markets, commonly known as “Seohak Ants (서학개미),” have been buying up Starbucks shares. “These investors seem to perceive that Starbucks shares have currently reached a low point,” said a market insider.
Starbucks was the most purchased foreign stock by Korean retail investors this month, according to the Korea Securities Depository. Between May 1 and May 10, these investors bought Starbucks shares worth $75.34 million.
However, analysts have cautioned about such investments, noting that investors should wait for more positive signs of recovery. One major concern is the recent surge in coffee bean prices, driven by severe droughts this year in Brazil, a leading producer of Arabica coffee. Arabica futures in New York rose to $4,434 a ton as of May 10, 17% higher than the average price last year, which was $3,801. The
The food and beverage sector is experiencing a slowdown as U.S. consumers shift from “post-pandemic revenge spending” to more selective spending as inflationary pressures weigh down on reckless consumption. “Many customers have been more exacting about where and how they choose to spend their money,” Starbucks CEO Laxman Narasimhan said during an earnings call on April 30. As a result, Starbucks’ U.S. store traffic fell by 7% in the first quarter, the largest drop since 2010.
