Starbucks Faces Headwinds: Analyst Maintains Hold Rating Amidst Challenges and Adjusted Earnings Forecasts

Analyst Andy Barish from Jefferies maintained a Hold rating on Starbucks (SBUX – Research Report) and decreased the price target to $84.00 from $94.00.

Andy Barish has given his Hold rating due to a combination of factors impacting Starbucks’s performance and outlook. The company reported a notable miss in its second fiscal quarter, with both U.S. and international comparable sales falling short of expectations. Barish points out that the challenges Starbucks is facing may not be easily resolved in the near term. The concerns include brand relevance and competitiveness, particularly in the Chinese market, which is experiencing heightened competition in the coffee industry. Additionally, planned innovations and new product launches have not been as well-received as management had hoped, indicating potential misalignment with consumer preferences.

Based on these observations, Barish has adjusted his forecasts for Starbucks, lowering the future earnings estimates for fiscal years 2024 and 2025. The downward revision is also a reflection of the reduced guidance provided by Starbucks, which anticipates flat operating margin year-over-year and modest earnings per share growth. Despite these headwinds, Barish believes that the current valuation of the company’s stock factors in the risks and rewards adequately. Therefore, he maintains a neutral stance, adjusting the price target to reflect the recalibrated expectations and the uncertain near-term visibility for Starbucks’s growth trajectory.

In another report released today, Citi also maintained a Hold rating on the stock with a $85.00 price target.

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Starbucks (SBUX) Company Description:

Founded in 1985, Starbucks Corp. is a Washington-based roaster and retailer of specialty coffee, with over 30,000 stores in 80 markets. It operates through three segments, including Americas, International and Channel Development. Starbucks stores offer coffee and tea beverages, roasted whole bean and ground coffees, single-serve and ready-to-drink beverages, food items such as pastries, sandwiches, salads, oatmeals, as well as a variety of merchandise. The company’s leading brands include Evolution Fresh, Teavana, Tazo Tea and Seattle’s Best.