Starbucks stock is a bright spot in Wednesday’s bleak market. Here’s why
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. The S & P 500 and Nasdaq were headed for back-to-back losses . A rise in oil prices Wednesday on renewed Iran war tensions pressured stocks. The highest consumer price index reading in over three years boosted bond yields, which did not help. Most of the inflation, however, is coming from high energy costs, which should abate when the Strait of Hormuz eventually reopens. Jim Cramer is more concerned about all the new stock coming to market in three mega IPOs, starting with SpaceX on Friday. Offerings from Anthropic and OpenAI are expected later this year or early next — not to mention big stock sales from the likes of Alphabet and others to fund their AI spending. It’s why we have been trimming positions ( three on Wednesday alone ) and padding our large cash position, which has swelled to about a 12.4% weighting in the portfolio. Wall Street analysts see Linde as a clear winner of SpaceX’s IPO . Redburn said Wednesday that more funding means more rocket launches, which is a boon for Linde as one of the dominant gas suppliers to the space industry. Specifically, SpaceX can complete its next-generation rocket Starship, which burns more oxygen than its workhorse Falcon rocket. Analysts project that Linde will pull in $6 million per launch by 2028, from under $4 million per launch last year. Redburn said Linde’s space sales could “scale rapidly” as management ramps up spending to meet increased demand. Analysts raised their Linde price target to $560 from $550. Redburn’s call isn’t a surprise to us. We’ve been calling Linde a beneficiary of the SpaceX IPO for a while. Plus, management hasn’t been shy about the opportunity in space either. ″This end use continues to see strong double-digit percent growth,” CFO Matthew White said on Linde’s first-quarter earnings call. Although it’s a small part of the industrial company’s overall revenue, it’s growing at an impressive clip. Once commercial space makes up at least 5%, Linde has said it will break out those sales as its own end market. Overall, space is a positive for Linde, but it’s not the main reason we love this stock. The company has its hand in a diverse set of industries — from healthcare to electronics to food and beverage. It has immense pricing power in several of them. Linde’s top notch leadership and excellent capital management has been a surefire way for the company to deliver for investors regardless of the macro environment. Starbucks is weighing strategic options for its Japanese business , according to Bloomberg. The report said the company is considering offering a stake in the business that could value it at about $2.5 billion. This would be a similar strategy to what CEO Brian Niccol did with China, where he formed a joint venture with Boyu Capital. Unlike China, where fierce competition from lower-cost players like Luckin Coffee has pressured Starbucks ‘ business, Japan has been a pretty good market for the company. On the April earnings call, Niccol said Starbucks had “an outstanding quarter” in the country driven by record sales over New Years, strong tourism, and menu additions. Starbucks was our best performer in Wednesday’s down market, up more than 1% on the session. Analysts at Cowen wrote Wednesday that they liked the “industrial logic” of monetizing Japan because it’s not a core market and would allow management to keep its focus on the US turnaround. We couldn’t agree more. Ultimately, though, the decision rests with Niccol. Ultimately, though, the decision rests with Niccol. He has our full trust, and if Starbucks can be better run with a partner in Japan, then the company should pursue it. Oracle reports after the closing bell , and the market will be focused on its AI backlog, capital expenditure guidance, and visibility into cash flow to support those AI investments. Oracle , like many tech stock, has had a tough June after reaching year-to-date highs. There are no major earning reports Thursday morning. Weekly jobless claims and the May producer price index are on the economic calendar. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.