Investors will be rewarded if they believe in Starbucks' turnaround story, CIO says

According to Laffer Tengler Investments CEO Nancy Tengler, Starbucks presents a buying opportunity amidst its ongoing turnaround, citing new CFO Cathy Smith's urgency and investments in labor as positive catalysts despite recent earnings misses and declining same-store sales; Tengler also recommends adding to Nvidia holdings, viewing the company as strategically positioned in the AI boom despite export restrictions to China; finally, she is bullish on EQT due to its commitment to returning free cash flow to shareholders and favorable natural gas price trends.

Analysis

Nancy Tengler of Laffer Tengler Investments identifies distinct investment opportunities across different sectors. Starbucks (SBUX), despite missing fiscal second-quarter earnings and revenue estimates and reporting a fifth consecutive quarter of declining same-store sales, is presented as a turnaround play offering an investment opportunity. Tengler highlights new CFO Cathy Smith's emphasis on urgency and strategic investments in labor as key catalysts, though CEO Brian Niccol has indicated these efforts will pressure near-term earnings. For Nvidia (NVDA), Tengler recommends using any market weakness to increase holdings, citing its dominant position as the "go-to chip provider" in the artificial intelligence boom and noting capacity constraints among hyperscalers. However, Nvidia faces challenges including an upcoming earnings report, the impact of U.S. export restrictions to China on its H20 chip, and a substantial $5.5 billion inventory write-down related to this chip, which analysts have called the largest in chip industry history. Finally, Tengler expresses bullishness on EQT Corp (EQT), an energy company, due to its commitment to return 60% of free cash flow to shareholders via buybacks and dividends, its current 1.1% dividend yield, and its free cash flow generation at twice the rate of competitors, coupled with an optimistic outlook for natural gas and LNG export prices.

Key Decisions for Investors

• For Starbucks, investors could consider initiating or adding to positions, recognizing the turnaround will take time and pressure near-term earnings, but offers potential long-term value driven by new management and labor investments.
• For Nvidia, investors might leverage market volatility to build positions due to its strong AI market positioning, while closely monitoring the upcoming earnings for clarity on China export impacts and the significant H20 chip inventory write-down.
• For EQT, investors focused on capital returns and energy sector exposure may find the company attractive due to its commitment to shareholder distributions, superior free cash flow generation, and anticipated tailwinds in natural gas markets.