Starbucks needs to 'turn off the growth valve': Analyst

Yahoo Finance Video
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Starbucks (SBUX) shares are rising on Monday following a report from The Wall Street Journal that activist investor Starboard Value has taken a stake in the company, aiming to boost the coffee stock. Guggenheim Partners senior analyst Gregory Francfort joins Market Domination to discuss his outlook on Starbucks.

Francfort acknowledges that Starbucks has "struggled" in recent years for "a variety of reasons," noting that "a lot of it is structural and a lot of it is industry-wide." He points out the company's aggressive unit growth, saying "it doesn't make sense" given the increased competition in the market. With new stores not contributing as much revenue as expected, Francfort suggests the coffee chain needs to "turn off the growth valve."

Regarding Starbucks's new energy products and its competition in that drink space, Francfort tells Yahoo Finance, "I'm not sure if it's making a dent on a $30 billion-dollar in sales brand in Starbucks." While he describes the new product innovations as "decent" and "pretty solid," he notes that marketing efforts have fallen short.

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This post was written by Angel Smith