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Starbucks Stock Nosedives 16% Amid Boycott, Inflation Woes

Starbucks (SBUX) - ★★★ - Ranked #78 in our Q2 2024 Large Cap Equity Rankings

Starbucks Corporation's shares experienced a significant downturn on Wednesday, plummeting 16% during intraday trading to their lowest level in nearly two years. The coffee giant's stock tumbled after the company slashed its annual forecasts, citing persistent weak demand from inflation-weary U.S. customers and a slower-than-expected economic recovery in China.

The company's decision to raise prices last year has backfired, as consumers grappling with rising costs have resorted to brewing coffee at home instead of frequenting cafes and restaurants. This shift in consumer behavior has dealt a blow to chains like Starbucks, which reported a decline in same-store sales for the first time in nearly three years.

Compounding Starbucks' woes is an ongoing boycott campaign fueled by concerns over the company's perceived support for Israel amid the ongoing conflict with Palestinians. The boycott movement has gained traction, further impacting Starbucks' revenue and casting a shadow over its financial performance.

Analysts attribute the stock's steep decline to a combination of factors, including weakening consumer demand due to inflation pressures and the boycott's impact on the company's reputation and sales. Starbucks now faces the challenging task of navigating these headwinds while attempting to regain consumer confidence and revive its financial trajectory.

We have maintained a neutral outlook over the next 12 months on Starbucks as they navigate these challenges.

As the company grapples with these challenges, investors and industry observers will closely monitor Starbucks' strategic moves and the effectiveness of its measures to address the boycott concerns and adapt to the evolving economic landscape.

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