New Starbucks ‘Dream’ CEO Swings $27 Billion in Market Value

(Bloomberg) -- Starbucks Corp. investors have never rewarded the stock more than they have today on the news that the coffee chain giant hired Chipotle Mexican Grill Inc.’s Chief Executive Officer Brian Niccol as its new leader.

Shares of Seattle-based Starbucks surged 25%, the most ever, and added $21.4 billion in market capitalization. On the other hand, Chipotle shares slid 7.5%, for a loss in value of $5.7 billion.

Niccol is being hailed as the top public restaurant CEO in the U.S. by several analysts, including Bloomberg Intelligence’s Michael Halen, who said the hire is a “no brainer.” Oppenheimer & Co.’s Brian Bittner said Niccol is a “dream hire” for Starbucks. In just a few hours following the announcement, the stock received at least four upgrades, with Niccol earning praise for his successful track record as chief at Chipotle, as well as at Taco Bell, which is owned by Yum Brands.

The optimism is well deserved. Chipotle shares climbed 773% since Niccol took over as CEO in March 5, 2018 through Monday’s close. Starbucks shares are up just 35% for the same period, while the S&P 500 has gained 99%.

See also: Chipotle Tumbles as CEO Exit Adds Uncertainty: Street Wrap

“In our view, Starbucks picks up a hall of fame restaurant CEO, and his appointment as Starbucks CEO and Chairman suggests a new era is underway,” according to TD Cowen analyst Andrew Charles, who upgraded Starbucks to buy from hold. Charles said he sees similarities between the turnaround at Chipotle and what Starbucks needs to do to improve traffic, including in marketing, product innovation, and operations.

Danilo Gargiulo, a restaurants analyst at Bernstein, writes to clients that “while it is always hard to find the ‘right time’ to enter a stock, we doubt investors will find a better time to consider a position in Starbucks if the new CEO brings the same rigor as when turning around Chipotle.” He currently rates Starbucks market perform.

(Updates to reflect closing share moves and market cap values; updates chart)