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Starbucks Rises After Bill Ackman Reinvests $720 Million

Starbucks gets a boost from activist investor Bill Ackman, who reestablished a position with the coffee-bar chain. The stake is valued at about $720 million.

Starbucks  (SBUX)  shares got a boost from activist investor Bill Ackman, who reestablished a position with the coffee retailing giant with a stake valued at about $720 million.

Shares of the Seattle company at last check were 5.4% higher at $71.47.

"In advance of recent market declines, in January we sold our stake in Starbucks as it approached our estimate of intrinsic value," Ackman's Pershing Square hedge fund said in its 2019 annual report. 

Pershing sold off its position in Starbucks in January, the report said. 

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But after the initial market decline caused by the coronavirus pandemic, Pershing "unwound our credit hedges and redeployed a substantial majority of capital by adding to existing investments including Restaurant Brands, Lowe’s, Hilton, and Berkshire Hathaway, and by investing $500 million ... in a secondary share offering by Howard Hughes. We also reestablished a position in Starbucks."

The report said that "Starbucks’ superb digital offering, delivery, and no-touch pickup are well adapted to service its consumers’ global coffee habit, particularly when compared with competitors who have not built digital and delivery offerings."

"While we expect that Chipotle – the Restaurant Brands concepts of Burger King, Popeye’s and Tim Horton’s – as well as Starbucks will lose a substantial amount of sales during shutdowns, they will likely gain digital and delivery market share during this period, and will thereby emerge stronger from the crisis," the report said.

Separately Piper Sandler analyst Nicole Miller Regan lowered the firm's price target on Starbucks to $70 from $74 and kept a neutral rating on the shares.

On Monday, JPMorgan analyst John Ivankoe downgraded Starbucks to neutral from overweight.