Starbucks (SBUX) stock is trading higher on Oct. 12 after the coffee giant explicitly ruled out buying Chipotle Mexican Grill (CMG), easing concerns about a costly acquisition. The denial follows a Financial Times report suggesting Starbucks had worked with advisers on a potential takeover proposal.
“Starbucks is not buying Chipotle,” a company’s spokesperson confirmed on Monday morning, triggering a rally in Starbucks shares that has them trading up about 10% year-to-date at writing.
Why Are Investors Cheering Starbucks Stock?
Starbucks’s clarification is sitting rather well with investors as it removes a potential complication from CEO Brian Niccol’s turnaround agenda.
On Monday, the company confirmed that it remains focused on its "Back to Starbucks” strategy, expressing confidence in its long-term growth prospects.
The bullish interpretation is straightforward: avoiding a major acquisition preserves management’s attention and reduces potential financing pressure.
Analysts had warned that buying Chipotle will require substantial borrowing or issuing new shares, which could dilute existing investors.
SBUX stock is gaining because the denial means fewer competing priorities as the coffee company works to improve its service, strengthen customer loyalty, and turn its operational investments into sustainable earnings growth.
Is It Worth Investing in SBUX Shares Today?
For long-term investors, Starbucks stock remains attractive heading into the fiscal Q4 earnings set to be reported in early November. Consensus is for the coffeehouse chain to record $0.72 per share of earnings (EPS) for its financial fourth quarter, which would represent about 38% growth on a year-over-year basis.
More importantly, SBUX is currently exchanging hands at a price-to-sales (P/S) multiple of about 2.7x — a meaningful discount relative to the historical averages.
Note that Starbucks typically gains 1.45% in October and a much higher 7.61% in November; this seasonal trend further improves its near-term appeal.
Wall Street Remains Bullish on Starbucks
It's also worth mentioning that Wall Street firms haven’t thrown in the towel on SBUX shares either.
The consensus rating on Starbucks sits at “Moderate Buy,” with the mean price target of about $110 indicating potential upside of nearly 20% from current levels.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.