|Bid||88.74 x 1300|
|Ask||88.77 x 900|
|Day's Range||87.58 - 88.79|
|52 Week Range||60.42 - 99.72|
|Beta (5Y Monthly)||0.50|
|PE Ratio (TTM)||30.37|
|Earnings Date||Jan 28, 2020|
|Forward Dividend & Yield||1.64 (1.86%)|
|1y Target Est||94.37|
Coffee will never go out of fashion, as evidenced by the 10 countries with the highest coffee consumption in the world. There is nothing better in the world than a hot, steaming cup of coffee to jolt you awake in the morning. Similarly, nothing comes close to coffee as you attempt to pull an all-nighter […]
Starbucks (SBUX) continues to benefit from robust performance by the Americas and China-Asia-Pacific segments, store openings, enhanced customer experience and, digitalization.
Starbucks staked out an early lead, as the Dow Jones today led the stock market higher ahead of a White House meeting on China trade issues.
Starbucks' management team showed a "high degree of confidence" that its objective of growth at scale is working through the medium term, Ivankoe said. Instead, Starbucks will offer food items that pair well with beverages, including a near-term use of plant-based protein. Under the leadership of CEO Kevin Johnson, Starbucks is creating a "world class AI and analytics team" to not only support customer ordering but inventory anticipation and labor scheduling, the analyst wrote in a note.
U.S. stock indexes were set to open modestly lower on Thursday, with investors staying on the sidelines ahead of the imposition of a fresh round of tariffs on Chinese goods. U.S. President Donald Trump has just days to decide whether to go ahead with tariffs on nearly $160 billion in Chinese consumer goods just weeks before Christmas, a move that could be unwelcome in both the United States and China. "Because the administration is prone to putting out surprise statements on trade, investors are afraid to get too far in front on the likelihood of any bad news," said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
Starbucks was upgraded to overweight from neutral at J.P. Morgan after a meeting with company management including CEO Kevin Johnson and CFO Pat Grismer. "We sensed a high degree of confidence that the 'growth at scale' agenda is working in the near and medium term, meeting if not exceeding set sales and margin objectives. No formal update to model, but we believe U.S. comps are 5%+ and that China results are at least within 1-3% expectations," said analysts John Ivankoe and Patrice Chen, who also hiked the Starbucks price target to $94 from $90. Starbucks, which closed Wednesday at $88.03, has climbed 34% this year, compared to a 25% gain for the S&P 500.
Starbucks shares get a boost from JPMorgan analyst John Ivankoe, who lifted his price target on the stock after a meeting with senior management that included CEO Kevin Johnson.
McDonald's (NYSE:MCD), Starbucks (NASDAQ:SBUX) and Dunkin Brands (NASDAQ:DNKN) were among restaurant stocks receiving attention from Wall Street's sell-side Tuesday. But do their shares have what it takes for a nice boost beyond the morning cup of Joe? Let's take a look at the latest finding off and on the price chart to allow for a stronger risk-adjusted determination for investors.The broader market has taken to both Grinch-like and spirited Santa Claus rally behavior this December. And for seemingly good reasons. From NATO to impeachment proceedings and jobs data, the major indices have been moved by both volatile jeers and joyous cheers over the past week.Apple (NASDAQ:AAPL) illustrates this frenetic, headline-driven price action well enough. And there's more to come with the Fed on tap and next week's Dec. 15 tariff deadline. But restaurant stocks MCD, SBUX and DNKN have all looked more like a cup of cold mud with investors. Now though, Wall Street has taken notice.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 4 Beaten-Up Pot Stocks Worth Considering in 2020 As part of a larger outlook for the sector, RBC's Christopher Carril initiated coverage on MCD, SBUX and DNKN stock. Let's take a look at those expectations and the price charts to decide whether these restaurant stocks can give investors' portfolios a caffeinated boost or otherwise. McDonald's (MCD)Source: Charts by TradingViewMcDonald's is the first of our restaurant stocks. Shares of MCD received an "outperform" rating and price target of $218. RBC cited substantial investments, reasserted earnings growth, accelerating cash flow, as well as $27 billion in dividends and buybacks as primary drivers.Technically, the provided monthly chart shows MCD stock has corrected over the past three months. Following a solid rally which more than doubled McDonald's share price over four years, today's healthy pullback appears to be a counter-trend buying opportunity.MCD Stock Strategy: If this restaurant stock can confirm the hammer test of the 38% retracement level tied to 2018's corrective low, it's a buy. Put MCD stock on the radar for purchase on a move through $197.I'd recommend taking partial profits at RBC's target price of $218. That's effectively a challenge of the prior highs. To contain downside risk, a blended 6% stop which effectively limits exposure and only exits if the hammer is broken makes sense. Starbucks (SBUX)Source: Charts by TradingViewStarbucks is the next restaurant stock. Shares of SBUX were also initiated with an "outperform" rating. Like MCD stock, RBC's price target of $97 offers similar upside expectations for the next 12 months.Supporting this bullish outlook, RBC noted investor concerns from 2017 and 2018 have been fixed by Starbucks management. SBUX also sports a rare combination of double-digit earnings growth despite its $100 billion-plus market capitalization.Technically, Wall Street's worries during the prior two calendar years were manifested as part of a large, mostly lateral three-year basing pattern. But shares of this restaurant stock did go on to gain more than 50% over several months after breaking out of the base last November.After consolidating those gains the past four months, SBUX stock has established a bottom. Earlier this month shares confirmed November's monthly hammer which found support slightly above the 38% Fibonacci level. It's bullish price action with a sprinkle of bearish worry as Starbucks has also broken its uptrend line of the past one-and-a-half years. * 7 Exciting Biotech Stocks to Buy Now SBUX Stock Strategy: Given Starbucks's superior growth prospects, I'd buy SBUX today as the hammer signal trumps our trendline-related concern. A 7% stop effectively minimizes dollar and pattern risk and further eases any worries. On the upside, I'm a bit more optimistic than RBC. I'd look for a move into $100 - $103 and slightly above Starbucks all-time high before reducing position risk. Dunkin Brands (DNKN) Source: Charts by TradingViewDunkin Brands is the last of our restaurant stocks. Unlike the bullish "outperform" ratings assigned to MCD stock and SBUX, RBC has started DNKN stock with a "sector perform" and price target of $79. The firm cited a lack of positive traffic, intense competition, and price multiple concerns. RBC also sees Dunkin Brands need to continue building out its digital footprint and brick-and-mortar customer experience as backing the tempered outlook.DNKN Stock Strategy: Technically, there is also some reason to be concerned with DNKN stock. Despite serving investors a nice combination of yet another similar-looking corrective base within its uptrend, stochastics bearishly diverged during the most recent peak in share price. The warning from the stochastics indicator could turn out to be a false negative. However, given DNKN's monthly hammer attempt at bottoming is also aligned with RBC's modest price target, the combination is enough to put a 'hold-off' recommendation on this restaurant stock.Investment accounts under Christopher Tyler's management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler's observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * The 5 Best Tech Stocks to Buy For the Next Decade * 4 Beaten-Up Pot Stocks Worth Considering in 2020 * Top 5 Tech Stocks of the 2010s Decade The post 3 Restaurant Stocks, 2 Buys and 1 Warning appeared first on InvestorPlace.
Who’s hungry? Investors.As the decade winds up, investors are on the lookout for the names that have what it takes to outperform the market and to fork over solid returns in the years to come. However, given the uncertainty hanging over the market as we head into 2020, zeroing in on the most compelling investment opportunities isn’t an easy job. So what’s an investor to do? We suggest following Wall Street’s lead as the analysts can provide a wealth of investing inspiration.Setting out on our own search, we rolled up our sleeves and got down to business, turning to the best of the best, investing firm RBC Capital. Not only does the firm take first place on TipRanks’ Top Performing Research Firms ranking, but it also houses some of the top rated analysts on the Street.Using the in-depth market data and investing tools from TipRanks.com, we were able to get the full scoop on 3 buy-rated restaurant stocks that one of the firm’s analysts, Christopher Carril, recommends snapping up. Let’s dig in.Restaurant Brands International (QSR)Restaurant Brands owns some of the most well-known quick service restaurant brands including Burger King, Tim Hortons and Popeyes. With over $32 billion in system-wide sales and about 26,000 restaurants, the RBC analyst likes QSR’s position in the industry.Carril just started up his coverage of the restaurant company by telling investors that QSR has a lot going for it. QSR is clearing the path to reach 40,000 units over the next eight to ten years, with Carril citing Burger King as the key driver of growth. However, even with the above average global systems sales growth witnessed year-to-date and accelerating comp growth for Burger King and Popeyes, its valuation matches that of its competitors in the space. This is partly due to Tim Hortons weakness, which is responsible for about half of the total operating profit. Having said that, the analyst points to QSR’s “near best-in-class unit growth (5%+), current momentum at BK/PLK, significant scale and potential to add brands in the future as key positives for a stock that remains attractively valued” as making it a stand-out.Adding to the good news, Carril believes that the company can turn things around at Tim Hortons. “Continued store remodels should provide a stronger foundation for Tims to add to its dominant market share in its home market, where competition has sharpened its focus in recent years. Furthermore, we see adjustments to the recently launched Tims Rewards program—such as transitioning members to the digital platform—as important to unlocking the long-term value of the loyalty program,” he commented.Bearing this in mind, Carril initiated coverage by issuing an Outperform rating and setting a $77 price target. Given this target, he believes that shares could rise 15% in the next twelve months. (To watch Carril's track record, click here)In general, the rest of the Street agrees with the RBC analyst. With 11 Buys and 2 Holds assigned in the last three months, the word on the Street is that QSR is a Strong Buy. To top it all off, other analysts are more aggressive with their forecasts as the $79 average price target indicates 18% upside potential. (See Restaurant Brands stock analysis on TipRanks)Starbucks Corporation (SBUX)The iconic coffee company just received a vote of confidence from Carril thanks to changes that have taken place over the last few years.Part of the excitement related to Starbucks has been generated by its back to basics approach. Back in 2017 and 2018, the company pivoted away from its strong service and beverage-led innovation strategy as concerns regarding the emerging third-wave coffee threat and cannibalization arose. Carril argues that SBUX appears to have “course-corrected”, revamping the in-store experience by refocusing labor towards guest-facing tasks and improving its beverage platform. These efforts already appear to be paying off as its Nitro Cold Brew has driven 3%-plus traffic growth in the last two quarters.The improvements haven’t stopped there. The coffee company has given its business model a refresh by shifting almost 900 company stores to licensed across various markets, agreeing to a licensing deal for its packaged goods and foodservice segment with Nestle, bumping up shareholder returns through share repurchases and dividends as well as taking advantage of its full company ownership in its China business.“We see these changes as supportive of SBUX's ‘growth at scale’ strategy, aiming to deliver on its long-term earnings growth objectives,” Carril wrote in a note to clients. Further, he adds, “SBUX is among only a handful of $100B+ market cap consumer companies expected to drive double-digit EPS growth over the next three years. We see the recent pullback given the expectation of below double-digit EPS growth in full-year 2020 (following two years of +17% growth) as providing a compelling entry point.”To this end, Carril initiated his SBUX coverage with a bullish call. Along with the Outperform rating, the $97 price target puts the potential twelve-month gain at 13%.Turning to other Wall Street analysts now, opinions are split. Out of 13 total analysts covering SBUX, 7 agree with Carril while 6 recommend a Hold, making the consensus a Moderate Buy. In addition, the upside potential comes in slightly lower than Carril’s estimate at 12%. (See Starbucks stock analysis on TipRanks)McDonald's Corporation (MCD)The fast food company symbolized by those famous yellow arches has definitely lagged year-to-date, up 10% compared to the S&P 500’s 25% gain. That being said, Carril thinks that McDonald’s is creating an “experience” that should serve as the foundation for future upside.MCD has made a significant investment in its domestic business. Through its acquisition of Dynamic Yield, which will enable it to use AI to improve the customer experience, and its Experience of the Future (EOTF) store remodels, the company could see substantial same store sales momentum.Carril also cites accelerating free cash flow (FCF) and a return of capital to shareholders as key positives. Overall capex is expected to drop starting in 2021 with the completion of the EOTF upgrades. “This should help to drive an acceleration in FCF (RBCe 15%-plus year-over-year to ~$6.6 billion in 2021) and supports MCD’s continued return of capital to shareholders. We expect a new three-year cash return target to be unveiled in early 2020, and model $27 billion in total dividends and share repurchases over the next three years, which is above consensus’ ~$26 billion estimate and greater than the expected $25 billion returned from 2017-2019E,” he explained.Not to mention Carril expects the burger chain to return to HSD EPS growth in 2020 as a result of the “underappreciated” Dynamic Yield purchase and ETOF. “While we acknowledge incremental depreciation (related to the EOTF rollout) and G&A (from tech acquisitions) will remain headwinds in the near-term, we see continued top-line strength—driven by global system sales growth of ~5%—as the key driver for our 2020 EPS estimate of $8.37 (7%-plus year-over-year), which is slightly more conservative vs. consensus of $8.48,” he noted.All of the above factors prompted Carril to start his coverage with a bang, namely an Outperform rating. The $218 price target conveys his confidence in MCD’s ability to move 12% higher in the twelve months ahead.What does the rest of the Street have to say? Given the 17 Buys and 6 Holds received in the last three months, the consensus among analysts is that MCD is a Moderate Buy. Also, the $220.15 average price target brings the upside potential to 13%. (See McDonald’s stock analysis on TipRanks)
(Bloomberg Opinion) -- The sixth and final season of the HBO comedy show “Silicon Valley” — which concluded, sadly, on Sunday — begins with a speech.Richard Hendricks, the chief executive officer of Pied Piper, the internet company he started five seasons earlier, is testifying before a Senate committee alongside executives from Facebook, Google, Amazon and, of course, Hooli, run by Hendricks’s archnemesis Gavin Belson. The hearing is about data privacy.When it’s Hendricks’s turn to speak, he gets up from his seat on the panel and starts pacing (“I just think better on my feet”), grabbing a bulky microphone box so the senators can hear him. Thomas Middleditch, who plays Hendricks, is a master of physical comedy, and the image of him walking back and forth with a big microphone box under his arm is hilarious. But what he’s saying isn’t remotely comical:These people up here — you want to rein them in. But you can’t. Facebook owns 80% of mobile social traffic. Google owns 92% of search. And Amazon Web Services is bigger than their next four competitors combined. … They track our every move. They monitor every moment in our lives. And they exploit our data for profit. You can ask them all the questions you want, but they’re not going to change. They don’t have to. These companies are kings and they rule over kingdoms far larger than any nation in human history. They won. We lost.For the previous five seasons, “Silicon Valley,” which was created by Mike Judge — the same man who gave us “Beavis and Butt-Head” and “Office Space” — had gleefully skewered the inanities and pretensions of the tech industry. Who can forget Judge’s eccentric venture capitalist Peter Gregory (said to be based on Peter Thiel) inspecting the sesame seeds on the burger buns arrayed on his desk (all bought from Burger King) and realizing that a shortage of said seeds was on the horizon — and that he could make a killing in the sesame seed market?Or the time the pompous stoner Erlich Bachman, whose house is “incubating” Pied Piper, goes to a private dinner claiming to be a “pescapescatarian” — “one who eats solely fish who eat other fish” — and all the other tech execs decide they want to be pescapescatarians, too.Or, in perhaps the single greatest line in the entire series, the ruthless, platitude-happy Belson, warning of a coming “datageddon,” tells his executives that Hooli’s compression algorithm has to beat Pied Piper’s. After all, he explains, “I don’t want to live in a world where someone else makes the world a better place better than we do.”(1)But as Hendricks’s speech suggests, this season felt a little different. Having mocked everything from companies that viewed revenue as a distraction to billionaires comparing their treatment to Holocaust victims, “Silicon Valley” seemed this season to turn its attention to more pressing matters. The short, seven-episode final season had its share of gags and funny lines, but it also seemed to me that Judge and his fellow showrunner, Alec Berg, wanted to point out not just what was inane and pretentious about tech culture but what was wrong with it.In the second episode for instance, Hendricks finds out that a contractor is using an internet game he created to collect data from Pied Piper’s customers — something the CEO has vowed his company would never do. When he tries to get rid of the contractor by collecting some of the conversations he has taped, the man instead plays them for his board — who are impressed with his gaming software’s ability to mine data.In the next episode, a sleazy billionaire offers Hendricks $1 billion for Pied Piper. Why? Because he wants to use it to sell data he will collect from the company’s customers. Hendricks turns him down, intent on creating a “new, democratic, decentralized internet” where the bad behavior of Big Tech “will be impossible.” That, he believes, is the only viable workaround to such problems as monopoly behavior and privacy violations. (The billionaire then buys the contractor’s gaming company.)But the high point of the season comes in the fifth episode, when Belson, who has been tossed out of Hooli (Pied Piper bought it), realizes that he can create a new persona by promoting ethics in the tech industry. “Tethics,” he calls it. Pretty soon he has every tech titan in the valley signing on to his “tethics pledge” and contributing money that will allow Belson to build the “Belson Institute of Tethics.”It turns out that every banal line in the tethics pledge was plagiarized from the mission statements of Applebee’s, Starbucks and other companies. Thus do Judge and Berg dispense with the hollow promises of Facebook and others to do better whenever they are called out on some new example of, well, untethical behavior. As Odie Henderson, a coder-turned-critic who recapped “Silicon Valley” for Vulture, put it recently, “Tech goodness is a naive fantasy.”Needless to say, the crew at Pied Piper fail spectacularly in its attempt to create a new democratic internet. In the final episode, filmed partly as a documentary a decade in the future, Hendricks, now the Gavin Belson professor of ethics in technology at Stanford, is asked whether he thinks Pied Piper made the world a better place.“I think we did OK,” he says wistfully. Judge and Berg, on the other hand, did better than that. For six too-brief seasons, they did indeed succeed in making the world a better place.(1) Mocking the phrase “making the world a better place” was a “Silicon Valley” preoccupation. See here, for instance.To contact the author of this story: Joe Nocera at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
RBC analyst Christopher Carril initiated coverage Tuesday of a handful of fast food restaurants and casual dining chains . Here is a summary of each initiation. Brinker International Carril initiated coverage ...
Technically speaking, the S&P 500 has sustained a sharp reversal from one-month lows, a rally that likely neutralizes the early-December market downdraft, writes Michael Ashbaugh.
Recent macroeconomic developments, escalating geopolitical tensions and historical data point to a surge in stock prices of small companies Continue reading...
The remaining retailers, which include MOD Pizza and First American Title, will open in August 2020.
2019 has been a big year for fast-food chicken, with the "chicken wars" turning from mild to spicy. Will you be trying any of the fried chicken sandwich options?
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The Zacks Analyst Blog Highlights: ExxonMobil, Starbucks, Diageo, Fidelity National Information Services and Colgate-Palmolive
Ever since rapidly growing Chinese coffee retailer Luckin Coffee (NASDAQ:LK) hit the public markets at an IPO price of $17 per share in May 2019, I've been pounding on the table, calling LK stock a long-term winner with tremendous upside potential.Source: Keitma / Shutterstock.com Today, LK stock trades hands at about $29. That represents a 70%-plus rally from its mid-May IPO price. For comparison purposes, the S&P 500 index is up less than 10% over that same stretch.In other words, Luckin Coffee stock has been a big winner so far. But, has all the winning been done? Is it too late to buy this strong stock?InvestorPlace - Stock Market News, Stock Advice & Trading TipsNo. Far from it. LK stock will continue to run materially higher over the next several years, powered by robust revenue and profit growth, the likes of which still isn't fully priced into shares today. Indeed, I think the long-term fundamentals here support LK stock at price tags above $40 in 2020. Luckin Coffee is a Long-Term WinnerThe bull thesis on LK stock is simple, compelling, and won't get cold anytime soon.China's nascent retail coffee market is booming. But, that retail coffee market is still small. The country's per capita coffee consumption measures around five cups per year. In America, per capita coffee consumption is up around 400 cups per year. In Norway and Sweden, people drink more than 1,000 cups per year. This huge discrepancy implies a huge opportunity for China's retail coffee market to expand over the next several years. * 7 Stocks to Buy in December Luckin Coffee is at the epicenter of this expanding Chinese retail coffee market. They operate small retail coffee shops that are designed for consumers to order their drinks ahead of time on their phones, and simply pick-up their coffee in the store a few minutes later. It's a unique concept which is attracting a lot of Chinese consumers because it optimizes convenience.Further, because these stores are doing really well, Luckin is opening a bunch of them. At the start of 2018, Luckin operated less than a dozen coffee shops. Today, they operate nearly 3,700, up 210% year-over-year.At 3,700 stores, Luckin is far from being done growing. Starbucks (NASDAQ:SBUX) operates more than 15,000 stores in the U.S. That's about 45 latte-locations for every million people. If Luckin were to match that rate, the company could be looking at more than 60,000 coffee shops in China.No, Luckin won't ever operate more than 60,000 stores in China. But, the point here is that robust unit growth will persist for a lot longer. As will its robust transaction-per-store growth. And average ticket size growth. Sustained big growth across all of those verticals will drive sustained big revenue growth. At the same time, margins are steadily improving, and Starbucks operates at 15%-20% operating margins, implying that Luckin has a huge opportunity to go from small and unprofitable today, to huge and profitable in five years.That transition will ultimately power LK stock well above $30 in the long run. Luckin Stock can Run Above $40Luckin Coffee's long-term profit growth prospects support LK stock at price tags north of $40 in 2020.The numbers here aren't too hard to follow. On the revenue side, there are three big drivers.For one, consider unit growth. Luckin is opening a ton of stores, and will continue to open a ton of stores because they are still small and the untapped addressable market is huge. This company should therefore be supported by 20%-plus unit growth over the next several years.Second, look at transactions-per-store growth. More and more customers will flock to those stores, because Luckin's mobile-focused ordering model is designed for the modern, urban consumer. Transactions per store were up more than 50% year-over-year last quarter. This metric should keep growing at a 10%-plus rate.Third, there's ticket size growth. The average ticket at Luckin remains very small, at under $2. Last quarter, average ticket increased more than 10%. It will continue to rise at a 10%-plus clip, as Luckin hikes prices and broadens its menu.Net net, Luckin projects as a 20%-plus unit grower, with 10%-plus transactions per store growth and 10%-plus average ticket growth. Putting all that together, Luckin reasonably projects as a 50%-plus revenue grower. Reasonably speaking, then, Luckin could be looking at $8 to $10 billion in revenues by 2025. * 7 Exciting Biotech Stocks to Buy Now Taking the mid-point and assuming operating margins progress towards industry-average 15-17% levels, then Luckin could produce around $4 in earnings per share by 2025. Based on a market-average 16x forward earnings multiple and a 10% discount rate, that equates to a 2020 price target for LK stock of nearly $44. Bottom Line on LK StockLK stock is a long-term winner that is in the early stages of its multi-year growth narrative. As this story plays out over the next few years, Luckin's revenue will march significantly higher, margins will improve by a ton, and today's big losses will turn into big profits.All of these positive developments will drive Luckin Coffee stock materially higher in the long run. At some point, valuation will become a problem. But, at $30, valuation isn't a problem yet, so the best thing to do here is remain long and strong.As of this writing, Luke Lango was long LK. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Retail Stocks to Buy That Dominated Thanksgiving Shopping * 6 Manufacturing Stocks to Buy as the Economy Recovers * The 7 Best Cryptocurrencies to Buy as Blockchain Heats Up The post Here's Why Luckin Coffee Stock is a Great Growth Stock to Buy Now appeared first on InvestorPlace.
(Bloomberg) -- SoftBank Group Corp.’s massive investment in WeWork triggered a multi-billion-dollar writedown and a rare apology from founder Masayoshi Son. But one analyst argues the deal is likely to work in the end and SoftBank will have the “last laugh.”Chris Lane of Sanford C. Bernstein says WeWork can have a bright future if SoftBank overhauls the business plan and more carefully focuses on the evolution of the corporate office market. He likens WeWork’s business model to Starbucks’s, where branding, consistency and global scale give it an advantage over the competition.Lane argues WeWork can achieve profitability if it pulls back on extraneous areas and calms a frenetic pace of expansion to focus on filling up existing space. That will allow it to grab an estimated 8% of an emergent market for pre-fitted offices for corporate clients, almost like a white-label tech gadget or home appliance.“We think investors should think of the basic business as being similar to Starbucks,” Lane wrote in a 21-page research report. “While profitable, the scale of profits that can be generated from a single site is small. Starbucks as a corporation only makes sense if you plan to open thousands of outlets.”It’s a contrarian take on a WeWork deal that has been widely viewed as a fiasco. After SoftBank invested in the co-working startup, its planned initial public offering fell apart as investors balked at its enormous losses and conflicted governance. Son conceded “there was a problem with my own judgment” as he announced the writedown last month. SoftBank has put about $14 billion into a startup that’s now valued at less than $8 billion.The Japanese company’s shares are down about 30% from their peak in April. They were little changed on Friday.After discussions with management, Lane explains they see an opportunity for WeWork to move beyond the niche of providing space for entrepreneurs to offering flexible real estate for a broad range of companies. He calls this “managed space as a service” and compares it to “software as a service,” which is the way many companies now buy from Microsoft Corp. and Salesforce.com Inc. WeWork, Lane says, sees the potential to make $500 per month on memberships as “an on-going annuity,” far more than software generates.SoftBank named Marcelo Claure, the former chief executive at Sprint Corp., executive chairman of WeWork and put him in charge of the turnaround effort. Under his leadership, Lane says the company will be able to focus on profitability by stopping any incremental expansion, filling its existing space and slashing overhead by getting rid of expansion staff and non-core businesses. WeWork’s ability to gather data about office-use and optimize layouts -- while not entirely substantiated -- could prove disruptive to the industry, he added.He estimates that WeWork’s revenue will rise from $720 million a quarter to about $1.5 billion if it can push occupancy to 90% on its current portfolio. Once profitable, WeWork will once again try to go public, perhaps in 2023, and then raise additional capital to resume expansion, albeit more slowly than before.With a discounted cash flow model, Lane projects WeWork would have an enterprise value of $28.8 billion in 2025. That would make SoftBank’s 80% stake worth about $19.1 billion, roughly 40% more than the estimated $13.8 billion the company and its Vision Fund have invested.“We believe WeWork’s valuation is justified if you believe in the long-term, ‘office space’ will be a managed service outsourced to professionals – and that WeWork will be the leading global player,” Lane wrote. “Despite the huge embarrassment WeWork has been for SoftBank this year, we suspect SoftBank will have the last laugh when they bring the company back to market in a few years – bigger and profitable.”(Updates with shares in the sixth paragraph.)To contact the reporters on this story: Pavel Alpeyev in Tokyo at email@example.com;Takahiko Hyuga in Tokyo at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Peter ElstromFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Wilmington Trust CIO Tony Roth joins Yahoo Finance’s Seana Smith to discuss the market outlook as U.S. tariffs on $156B worth of Chinese goods are set to take effect on December 15.