What Happened?
Shares of coffeehouse chain Starbucks (NASDAQ: SBUX) fell 10.7% in the morning session after President Trump announced "reciprocal tariffs" on all US imports, set at a rate of 10% or more. Markets reacted negatively to the announcement, reflecting deep concerns among investors about the broader economic implications. The tariffs were likely seen as a significant threat to global trade flows, with the potential to slow economic growth, drive up consumer prices, and spark retaliatory measures.
Wedbush analyst Dan Ives captured the prevailing market anxiety, stating, "We would characterize this slate of tariffs as 'worse than the worst case scenario' the Street was fearing." His comment highlighted how the scope and severity of the tariffs far exceeded Wall Street's expectations, adding a new layer of uncertainty for businesses and investors.
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What The Market Is Telling Us
Starbucks’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. Moves this big are rare for Starbucks and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 8 months ago when the stock gained 23.4% on the news that the company announced that CEO and Director Laxman Narasimhan would step down effective immediately. Brian Niccol, the CEO of Chipotle, would replace him.
During Niccol's time at Chipotle, revenue nearly doubled, profits increased nearly sevenfold, and CMG's stock price increased by nearly 800%. Niccol's industry experience includes multiple leadership roles at Taco Bell before he became CEO of the company. He has also held executive roles at Pizza Hut, another division of Yum!
The market's reaction to the news suggested investors were positive about the prospect of the business under new leadership following the recent quarters of earnings underperformance.
Starbucks is down 4% since the beginning of the year, and at $88.52 per share, it is trading 23.6% below its 52-week high of $115.81 from February 2025. Investors who bought $1,000 worth of Starbucks’s shares 5 years ago would now be looking at an investment worth $1,404.
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