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Why Starbucks' Shares Are Rising Today

By John Rosevear - Mar 13, 2020 at 11:38AM

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It appears that bargain hunters are wading in.

What's happening

Shares of coffee giant Starbucks (SBUX -0.65%) were bouncing back on Friday as bargain-hunting investors waded in after one of the largest market declines in years. 

As of 11:00 a.m. EDT, Starbucks' shares were up about 4% from Thursday's closing price.

So what

Starbucks' shares have had a wild ride in recent days, falling 17.6% from the end of last week through Thursday's close. But it's not surprising that shares were attracting value-minded bargain hunters on Friday morning. The company remains an appealing longer-term investment, with good management, a solid growth plan, and a decent dividend yield (2.4%).

Three frozen drinks in plastic Starbucks cups

Image source: Starbucks.

Still, the near-term concerns are real. The virus pandemic has already hit China hard, and while the total number of cases in the United States is still small, retail traffic is already falling as consumers steer clear of crowded areas. 

CEO Kevin Johnson yesterday announced several virus-related changes, saying that stores will implement protective measures on a case-by-case basis as needed, while Starbucks employees will now be protected by a new "catastrophe pay" policy that will give them added paid sick time as well as 14 days at full pay to "self-quarantine" should they contract the virus.

Now what

It's still not clear how badly the U.S. and European economies will be affected by the virus. It's nearly certain that Starbucks' sales in those regions will take a near-term hit, but whether that lasts for a few weeks or much longer remains to be seen. That said, the company's longer-term prospects still appear bright.

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