Please ensure Javascript is enabled for purposes of website accessibility

Why Starbucks' Shares Are Surging Today

By John Rosevear - Mar 24, 2020 at 11:37AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A CEO interview helped encourage investors to jump in.

What happened

Shares of Starbucks (SBUX 3.87%) surged on Tuesday morning, after its CEO said that the company's balance sheet is strong and that it is applying lessons learned in China to get through the coronavirus pandemic in the United States. 

As of 10:45 a.m. EDT, Starbucks' shares were up about 11.4% from Monday's closing price. 

So what 

In an interview with CNBC on Tuesday, CEO Kevin Johnson made a few points intended to reassure nervous investors:

  • Starbucks learned its COVID-19 "playbook" over nine weeks of dealing with the pandemic's initial outbreak in China. It's now applying lessons learned in China to its businesses in North America and Europe.
  • Starbucks has already reopened many of its stores in China. It's "going slow" in Wuhan, the city hit hardest by the virus, but its stores are reopening there as well. 
  • Starbucks' balance sheet is strong, and the company should have no trouble weathering a period of reduced revenue while the pandemic continues in the U.S.

Johnson's comments, together with the expectation that Congress will agree on a huge stimulus and relief package today, apparently convinced investors to start jumping back into the stock. 

3 cold-drink cups with Starbucks logos.

Image source: Starbucks.

Now what

Starbucks said last week that it has moved to a "takeout-only" model in the United States, eliminating seating inside and outside its stores for the time being. The company has also stepped up sick-leave benefits for workers and is allowing workers to stay home -- for any reason -- for the next few weeks with full pay. 

Johnson has so far made all the right moves to take care of employees while generating some revenue during a difficult period. Now investors will have to watch and wait, to see how the pandemic plays out -- and how quickly the economy recovers after. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Starbucks Corporation Stock Quote
Starbucks Corporation
$78.11 (3.87%) $2.91

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.