Nearly a dozen analysts either lowered their price targets or downgraded rankings following Starbucks’ disappointing quarterly report, as they view existing headwinds as a longer-term problem for the coffee chain. Starbucks’ second-quarter earnings and revenue fell wanting analyst estimates as a consequence of a surprise decline in same-store sales. After the bell rang on Tuesday, the corporate also lowered its profit and revenue forecast for fiscal 2024, because it expects underperformance to proceed for several more quarters. Shares fell to a 52-week low and fell nearly 17% during Wednesday’s session, setting the stock on the right track for its worst day since March 2020. Shares have fallen about 23% for the reason that start of the yr. With its weakest traffic performance outside of the pandemic or Great Recession, Starbucks posted a “staggering across-the-board failure across all key metrics,” said William Blair analyst Sharon Zackfia. She downgraded the stock to Market Perform and set a price goal of $73, suggesting the stock could fall 17.5% from Tuesday’s closing price of $88.49 per share. “While management is rolling out quite a lot of initiatives to right the situation, the numerous reversal of fortunes at Starbucks raises questions on whether there are greater – and harder – problems afoot, corresponding to whether the corporate will Price has gone too far or whether the brand has lost a few of its appeal,” Zackfia wrote in a note on Tuesday. Zackfia expects the company’s lower forecast to be achievable. For the full year, sales growth is expected to be low single-digit range and flat to slightly higher earnings per share are expected. However, the forecast leaves “significant uncertainty” about how quickly sales and profit growth can recover, she said. me-State,” aiming to return to its algorithmic growth target of more than 15% earnings growth next year, Zackfia added. Starbucks forecasts sales will improve in its fiscal fourth quarter. SBUX YTD Mountain Starbucks shares year-to-date. Deutsche Bank echoed these concerns by downgrading the stock to Hold. The stock faces “broad headwinds, with limited visibility into the pace of the recovery,” analyst Lauren Silberman said in a note Wednesday. She pointed to Starbucks’ slowdown in the U.S. market and limited improvement since the recent launch of the Lavender and Spicy Refreshers chain. The poor performance of the new offering makes it harder to “ensure a meaningful recovery” against the backdrop of a more difficult consumer and macroeconomic environment, she said. Adding to Silberman’s concerns are continued weakness in consumer and same-store sales in China and Starbucks’ decision to slow sales growth. But Deutsche Bank maintained its $89 price target, suggesting the stock could gain just 0.6% at Tuesday’s close. “We still see SBUX as one of the highest quality global restaurant companies trading at multi-year lows, although given limited visibility into the timing of a turnaround and earnings, we believe the risk-reward trade-off is balanced,” she said. Starbucks stock hasn’t had a positive year since 2021. Several other companies – including JPMorgan, Wells Fargo, UBS and Bank of America – lowered their price targets but maintained their more bullish stance on the stock. Bank of America’s Sara Senatore maintained her “Buy” rating and $108 price target, implying a potential upside of about 22% – a fairly optimistic target compared to other companies. Senatore’s stance is underpinned by her expectation that Starbucks’ profit growth will accelerate again in 2025, driven by traffic-driving initiatives such as more menu innovation and operational improvements. CEO Laxman Narasimhan told analysts during the company’s earnings call that Starbucks plans to offer a version of its app that attracts casual customers and is also looking for ways to meet late-night demand. JPMorgan analyst John Ivankoe maintained his overweight rating but lowered his price target to $92 from $100. He noted that the results were a “real negative surprise” and that management was under pressure to perform, especially as the brand faced a backlog of unionization efforts in U.S. stores and its stance on the Israel-Hamas war.
Thursday, November 28, 2024
