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Why Shares of Starbucks Are Bouncing Back Today

By John Rosevear - Mar 19, 2020 at 3:55PM

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Bargain hunters are taking a second look at the beaten-up coffee giant.

What happened

Shares of Starbucks (SBUX 3.76%) were on the rebound on Thursday, a day after the company outlined a series of new measures at a virtual annual meeting only to see its shares sell off sharply.

As of 3:30 p.m. EDT, Starbucks' shares were up about 8.8% from Wednesday's closing price. 

So what

In what seemed like an upbeat presentation on Wednesday, CEO Kevin Johnson reviewed the company's response to the coronavirus pandemic and explained the measures it will now take. The company is trying to make the best of the situation while keeping employees and customers as safe as possible.

Three cold-drink cups with Starbucks logos.

Image source: Starbucks.

There was some good news in Johnson's presentation, including news that 90% of Starbucks' China stores have reopened, and that the company is boosting its share-buyback program. But nervous investors didn't seem to hear it: Starbucks' shares were down sharply later in the day. 

Now, after investors have had a chance to digest the news -- and Starbucks' suddenly very low share price -- they seem to be wading back in. 

Now what

Starbucks remains a well-run company dealing with a difficult situation. Measures to slow the spread of the COVID-19 coronavirus outbreak have clobbered retail traffic in the U.S., Canada, and much of Europe over the past couple of weeks. Starbucks has kept stores open to try to continue to serve customers, but on a take-out or drive-through basis only -- no more seating (inside or outside) for the time being -- and by boosting sick-leave benefits for employees.

Will it be enough? I think if the company can keep nervous employees satisfied and continue to generate some revenue through the crisis, it could come out of this better than some investors currently expect.

Those are big "ifs," of course. Johnson has made good moves so far, but we'll have to wait to see how this plays out.

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