Starbucks' textbook turnaround is now starting to bear fruit; 'Disgusting' response from Hims & Hers Health
1) My friend Lloyd Khaner of Khaner Capital is the ax on coffee giant Starbucks (SBUX). He has owned it very profitably at various points over the last two decades, so I've quoted him nearly a dozen times in my dailies (archive here).
The last time was in my November 6 e-mail, after the company's earnings report. Back then, Lloyd said it wasn't yet time to buy the stock:
Mark your calendars for late January 2026 – that's when Starbucks will hold an investor day that lays out their financial expectations and vision for the coming year and beyond. I'm waiting until then before making a decision. But I'm getting very close to pulling the trigger, very, very close...
So I was very interested when he texted me this on January 29, right after the company's investor day:
Coffee's ready! I started buying SBUX.
The textbook turnaround by Starbucks that I've been watching for the last few years is now starting to bear fruit. If you get a chance, watch today's investor day here. It's got it all. Financial metrics, operational changes and initiatives, cultural, focus, and stream of very talented executives.
Bottom line, I'm looking for mid-single-digit sales growth and double-digit earnings growth as far as the eye can see – and that's pretty far... If all goes even close to plan, Starbucks will be better than ever.
Turning around a company as large as Starbucks is like turning around a battleship. But once it's done and starts gaining momentum, it's hard to stop. I think we are at the beginnings of the forward momentum for Starbucks 2026 and beyond. Like all good things, this was worth waiting for.
I asked whether the stock was too expensive – at 43.5 times analysts' estimates of $2.28 per share for this year and 33.5 times next year's expected $2.98. He replied:
The stock looks cosmetically expensive because they've underperformed for the last two to three years. I see no reason why the stock can't rise at least 50% over the next three years.
Right now I think they'll do $5 per share in earnings in fiscal 2028. Give that a 30x multiple and you get $150 per share. And if I had to bet, I'd say my $5 estimate will probably be too low rather than too high. We'll see...
Thank you as always, Lloyd! I think you've articulated a very interesting idea of a high-quality business.
Since our text exchange, the stock is up slightly from $93.88 to yesterday's close of $99.12.
My team and I at Stansberry's Investment Advisory are always on the lookout for high-quality businesses trading at attractive multiples. When we find a stock idea we like, our paid subscribers will be the first to know.
(If you're not already an Investment Advisory subscriber, you can become one by clicking here.)
2) I can't let this go without commenting...
On Monday and Tuesday, I wrote about the implosion of one of my "Stinky Six" stocks, Hims & Hers Health (HIMS). The company is being sued by pharmaceutical giant Novo Nordisk (NVO) for violating its weight-loss-drug patent.
After the 65% decline in its shares since I named it as one of my top stocks to avoid on October 29, I concluded that "I would certainly continue to avoid it."
I feel even more strongly about this after seeing this post on social platform X that the company posted on Monday, directed at Novo:
I agree with this response:
Continue to avoid HIMS.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.