Redburn-Atlantic Downgrades Starbucks (SBUX) to Sell

Redburn-Atlantic analyst Edward Lewis downgraded Starbucks (NASDAQ: SBUX) from Neutral to Sell with a price target of $77.00 (from $84.00).

The analyst comments: "Brian Niccol has been hired to solve this growth problem and his Back to Starbucks plan has plenty of merit, looking to simplify the business, accelerate throughput, revive the brand and step up investment. His track record means that he will be given time. We model a return to comp growth in FY25 but we question what level of comp growth the business can sustain given less support from ticket. Our chief concern is the cost Starbucks must incur to deliver this recovery. In fact, this has been Starbucks’ Achilles Heel since 2017, where company-operated stores have grown revenues at 7.5% pa but store operating expenses have grown at 9.5% pa, representing an 820bp headwind to margins. We see a similar scenario with the Back to Starbucks plan where consensus does not reflect the uplift in costs required to sustain the plan (Fig 1). With shares trading above a 20-year average P/E multiple, there is little room for error. We downgrade to Sell with a $77 price target."

For an analyst ratings summary and ratings history on Starbucks click here. For more ratings news on Starbucks click here.

Shares of Starbucks closed at $98.80 yesterday.

You May Also Be Interested In

• Morgan Stanley Starts Sampo Oyj (SAMPO:FH) (SAXPY) at Equalweight
• Jefferies Downgrades Zealand Pharma A/S (ZEAL:DC) (ZEAL) to Hold
• JPMorgan Starts Lotte Shopping Co Ltd (023530:KS) at Neutral