SBUX is overvalued; current price exceeds fair value estimate by ~30%.

We have huge news for Starbucks and Chipotle stock investors, according to the Financial Times. Starbucks is working with advisors Evercore ISI on a potential acquisition of Chipotle.

This is big news, and if you didn't know, Starbucks' current CEO , Brian Nicol, was the CEO of Chipotle before Starbucks lured him in with a huge offer that encouraged him to join as a leader. while Starbucks' stock fell by more than 4 %.

While I felt that Starbucks had been overvalued for some time now, at $89 it seems to be about 30% more than my fair value estimate of $63.

Starbucks stock has not performed as well as Chipotle this year.

The association with Starbucks will lead to benefits. My initial reaction was on the back side, i.e., the operational side. Not so much on the consumer-facing side. I do n't see how these two things can be combined, selling coffee at Chipotle or selling burritos at Starbucks.

I don't know how this integration can succeed. Perhaps it would make more sense to bring some Starbucks coffee varieties to Chipotle, for example. But I don't see any clear links there.

I see clear links in restaurant operations, and in the volume of purchases. True, both need to purchase paper bags, plastic cups, straws, drinks, and have relationships with beverage companies, relationships with investors, and real estate development teams for these restaurants in these locations.

Therefore, from this perspective, there are many synergies that can be achieved.

I do n't know how Starbucks stock investors will feel about this. I think it will depend on the price that will be paid.