Venti-Sized Volatility: Why Jim Cramer is Playing It Cool with Starbucks
As the coffee giant prepares for a high-stakes earnings report and investor day, the market is bracing for a potential caffeine crash. We dive into why the pros are waiting for a dip before taking another sip of Starbucks stock.
What Happened
Grab your double-shot espresso, because the stock market is currently buzzing on a mix of AI deals and earnings anxiety. While the S&P 500 is playing a game of 'wait and see' ahead of the Federal Reserve’s interest rate decision, the real drama is brewing at Starbucks (SBUX).
After a massive 14.5% rally to kick off the year, the coffee king is facing a moment of truth. Jim Cramer and the CNBC Investing Club recently downgraded the stock to a '2-rating,' not because the coffee is bad, but because the price might have gotten ahead of itself. With earnings dropping Wednesday and a massive Investor Day on Thursday, the stakes couldn't be higher.
Elsewhere in the market, Corning (GLW) stole the spotlight, surging over 16% after snagging a massive $6 billion deal to provide fiber-optic cables for Meta’s AI data centers. Meanwhile, Salesforce (CRM) landed a $5.6 billion U.S. Army contract, proving that even Uncle Sam is looking for a digital upgrade, though the stock struggled to find its footing amidst AI competition fears.
The Starbucks Strategy
Why the hesitation on Starbucks? It comes down to expectations versus reality. CEO Brian Niccol is the man with the plan, but he’s inherited a complex turnaround. Cramer is betting that the market might be expecting a 'miracle brew' when Niccol is actually preparing a slow-drip recovery.
As Cramer noted during the Morning Meeting: "Just be patient. We may not get what we want from Starbucks."
The logic is simple: If the earnings aren't perfect, 'flippers' (short-term traders) might dump the stock. If Starbucks dives, Cramer sees it as the perfect opportunity to upgrade the stock and buy back in at a discount. It’s the investing equivalent of waiting for the 'Happy Hour' discount instead of paying full price.
Quick Take
- The 14.5% Jump: Starbucks stock has been on a tear this year, making it vulnerable to a 'sell the news' event if earnings don't dazzle.
- The $6 Billion Glass Act: Corning’s 16% jump shows that the AI boom isn't just about chips; it's about the physical cables that connect them.
- The Dollar Factor: Procter & Gamble (PG) got a downgrade from TD Cowen (price target moved to $156), but a weakening U.S. dollar could actually give their international sales a hidden boost.
- Modern Warfare: Salesforce’s $5.6 billion Army contract proves enterprise software is still vital, even if investors are currently obsessed with LLMs.
Why It Matters
This isn't just about whether your latte costs fifty cents more next month. It’s about the 'Turnaround Narrative.' When a new CEO like Brian Niccol takes over, investors often expect an immediate transformation. However, fixing supply chains, improving store throughput, and winning back disgruntled customers takes years, not weeks.
If the market overreacts to a 'meh' earnings report, it creates a classic entry point for long-term investors. It also highlights a broader trend: the market is currently punishing companies that don't show immediate AI integration or explosive growth, as seen with Salesforce’s muted reaction to its multi-billion dollar military win.
The Bottom Line
Don't chase the steam—wait for the coffee to cool down before you take a gulp of Starbucks stock.