Starbucks Ailed By Slower Top-line, Stiff Competition: Analyst Cuts Forecast

Guggenheim analyst Gregory Francfort reiterated a Neutral rating on Starbucks Corporation SBUX, lowering the price target to $100 from $101.

The company’s first-quarter revenue increased 8% year-over-year to $9.4 billion, which missed the consensus estimate of $9.59 billion. Starbucks reported quarterly earnings of 90 cents per share, which missed analyst estimates of 93 cents per share.

Following the results, the analyst lowered 2024 adjusted EPS estimate to $4.00 from $4.05, citing increased competition in the U.S. market that will continue to cap top-line trends and the valuation multiple for shares.

According to the analyst, when Starbucks initially guided FY24 EPS, substantial cost-cutting in the U.S. was likely to provide upside potential to earnings. 

However, slower top-line and more discounting in the category have eliminated that upside and forced the company again into the position of needing a sales acceleration to reach their projections. 

Francfort said he does not want to model an acceleration, likely leaving the analyst about $0.10-$0.15 below consensus. 

Shares are not particularly expensive at 23x C’24 EPS for mid-teens EPS growth, the analyst adds.

Price Action: SBUX shares are trading lower by 0.51% to $92.56 on the last check Thursday.

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