Shares of Starbucks Corporation SBUX were trading lower by 5 percent Friday after the coffee and food chain's fiscal first-quarter earnings report disappointed investors across multiple metrics. Perhaps most notably, same-store sales growth of 2 percent fell short of the 3-percent analysts were expecting. Here's a roundup of what some Wall Street analysts were saying after the print.
Morgan Stanley: Results Not As Bitter As They Seem
Morgan Stanley's John Glass maintains an Overweight rating on Starbucks' stock with an unchanged $72 price target.
Starbucks' earnings report was "subpar" and it is clear that "something's abrew," Glass said in a research report. Heading into the earnings report, the overall sentiment was already low, so a same-store sales miss isn't necessarily a surprise, he said. But the coffee chain's commentary for the current fiscal second quarter has "dampened hope" that sales will rebound in the near-term.
Given a disappointing quarter and few signs of momentum, investors are right to ask if "the brand is broken," the analyst said. Fortunately for long-term investors, the answer is no, as the company remains the retailer with the highest customer frequency of any category, with a huge competitive moat and no competitors of equal scale anywhere in the world, Glass said.
Stifel: 'What The Frap Is Wrong?'
Stifel's Chris O'Cull maintains a Hold rating on Starbucks' stock with an unchanged $58 price target.
Starbucks' sales and operating income shortfall in the fiscal first quarter was surprising, as it even missed the low end of the company's revised targets provided in early November, O'Cull said in a research report. On top of that, the earnings per share beat is attributed to multiple one-time items below the line.
Starbucks' Americas unit once again showed deteriorating same-restaurant sales due to poor holiday performance, while the fiscal second quarter has "started off softer," the analyst said. Unfortunately, Starbucks now has a reputation of reporting poor same-restaurant sales metrics, which could be attributed to a trend of consumers shifting some of their discretionary spend to other categories, O'Cull said.
Oppenheimer: No Worries
Oppenheimer's Brian Bittner maintains an Outperform rating on Starbucks' stock with an unchanged $66 price target.
Starbucks' fiscal first-quarter earnings report wasn't particularly exciting, but the stock's 5-percent decline makes the valuation "cheaper" at 20-21x forward P/E, Bittner said in a research report.
To move the stock's valuation higher, the company needs to show an acceleration in same-store sales above 3 percent — an event which could come after the June quarter, Bittner said. In the meantime, the stock will likely remain "stalled," but longer-term investors should take advantage of the pullback to gain exposure to "one of the retail's best operating companies at an intriguing valuation," he said.
Wedbush: Compelling Long-Term Story
Wedbush's Nick Setyan maintains an Outperform rating on Starbucks' stock with an unchanged $70 price target.
Starbucks' earnings report may have confirmed the "inevitable" slowdown in the Americas unit, as the performance was "underwhelming," Setyan said in a research report. But on the other hand, investor attention is likely to shift away from the Americas unit and focus on the multiple medium- and long-term drivers, Setyan said.
Starbucks has scheduled a conference call for Wednesday, Jan. 31 to offer an update on its China joint venture, the analyst said. This is notable, as over time Starbucks' operating income contribution from outside of the U.S. will become more than 50 percent of the total , according to Wedbush.
Elsewhere On The Street
Stephens' Will Slabaugh maintains an Equal-Weight rating and $52 price target on Starbucks' stock, noting that the brand is showing signs of moderation at a time when the "consumer broadly improves."
- William Blair's Sharon Zackfia maintains an Outperform rating on Starbucks' stock, noting that a "comp recovery is a matter of when, not if."
- Tigress Financial's Ivan Feinseth said in his morning newsletter that the weakness in Starbucks' stock represents a buying opportunity, as new initiatives will "drive greater shareholder value creation."
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