Is Now The Time To Buy Starbucks Stock? 6 Analysts Weigh In On Drop

Starbucks Corporation SBUX reported Tuesday afternoon with mixed fiscal first-quarter results highlighted by a 5% U.S. same-store sales decline.

The coffee chain posted a revenue miss, but EPS beat.

Here's how six Starbucks sell-side analysts reacted to the print.

The Starbucks Analysts

Wedbush analyst Nick Setyan maintains a Neutral rating on Starbucks with a price target lifted from $105 to $108.

Wells Fargo analyst Jon Tower maintains a Buy rating on Starbucks with a price target lifted from $116 to $120.

See also: How to Buy Starbucks Stock

Cowen analyst Andrew Charles maintains an Outperform rating on Starbucks with an unchanged $112 price target.

BofA Securities analyst Gregory Francfort maintains a Neutral rating on Starbucks with a price target lifted from $105 to $106.

KeyBanc analyst Eric Gonzalez maintains a Sector Weight rating on Starbucks.

Stephens analyst James Rutherford maintains an Equal-Weight rating on Starbucks with an unchanged $100 price target.

Wedbush: 'Solid' Quarter, But Stretched Valuation
Starbucks reported a "solid" quarter that was highlighted by an EPS beat of 61 cents versus estimates of 55 cents, Setyan wrote in a note. 

The first-quarter same-store sales decline of 5% was consistent with Wall Street's expectations and in line with management's guidance of down 5% to down 6%.

The international same-store sales decline of 3% was worse than the 2% decline expected.

The analyst's $108 price target is based on 30 times P/E on 2022 estimates of $3.59 and implies a 10% premium to the stock's five-year median forward P/E of 27.4 times.

Wells Fargo: 'Thesis-Affirming' Report

Starbucks reported another "thesis-affirming event for the bulls,"as the company delivered a solid top- and bottom-line despite ongoing challenges due to the COVID-19 pandemic, Tower wrote in a note.

 

The key metrics that bulls will highlight include the following, the analyst said:

1) U.S. reward members grew 2.5 million from last quarter to 21.8 million.

2) digital sales growth continued to expand in China as 90-day active rewards members reached 15.3 million.

3) average ticket sizes can sustain above pre-pandemic labels given greater food attach, higher plant-based food sales and momentum in cold beverages.

The company's recent strength should give investors confidence in management's ability to lift its 2030 global store count from around 33,000 today to 55,000, according to Wells Fargo. 

Cowen: Long-Term Story Affirmed
Starbucks reinforced the long-term bullish case for the stock during its post-earnings conference call, Charles wrote in a note. First, the active loyalty member figure of 21.8 million "trounces" the pre-pandemic peak of 19.4 million members, the analyst said. 

Management indicated it expects recent higher ticket transactions to sustain while traffic levels steadily improve, he said.

As such, Cowen sees a path for the company to regain peak sales volumes despite ongoing disruptions to morning routines.

BofA: Management Turnover A 'Challenge' To Fix

Starbucks announced in conjunction with the earnings report that COO Roz Brewer will leave the company in the coming weeks. This marks the second notable C-suite departure, as Patrick Grismer is retiring as CFO.

Starbucks has a deep roster of talent, but multiple turnovers at the C-suite level at the same time "is always a challenge," BofA's Francfort wrote in a note.

KeyBanc: Conservative Guidance

Starbucks' management issued fiscal second quarter non-GAAP EPS guidance of 45 cents to 50 cents, which fell short of the Street's estimate of 60 cents, Gonzalez wrote in a note.

But the guidance could be seen as conservative, as management also acknowledged January same-store sale trends improved, the analyst said. 

Management did note it will offer more in-depth guidance when it releases its fiscal second quarter earnings report, he said. 

Stephens: New Estimates

Exiting Starbucks' Tuesday report, Stephens is updating its second-quarter models as follows:

• Global same-store sales growth of 18%.
• Americas SSS growth of 7% versus guidance of 5% to 10% for the U.S. only.
• International SSS estimate of 50.4%.
• Revenue revised from $6.815 billion to $6.795 billion.
• Adj. EBITDA estimate revised from $1.313 billion to $1.281 billion.
• EPS adjusted from 55 cents to 51 cents versus management's guidance of 45 cents to 50 cents.

For the full-year 2021 the analyst is expecting:

• Global SSS estimate revised from 21.6% to 20.4%.
• Americas SSS estimate unchanged at 18%.
• Revenue estimate revised from $28.569 billion to $28.236 billion.

SBUX Price Action: Shares of Starbucks lost 6.51% Wednesday, closing at $97.87. 

Related link: $1,000, 5 Years Later: What Would Starbucks Stock Be Worth?

(Photo: Starbucks)