Starbucks Shares Tank On Guidance Despite China Upside: 5 Analysts On 2023 Outlook

Shares of Starbucks Corp SBUX continued to decline in the premarket on Wednesday, despite the company reporting upbeat quarterly results.

Here's what some analysts have to say about management's disappointing guidance.

• RBC Capital Markets analyst Christopher Carril reiterated a Sector Perform rating, while reducing the price target from $115 to $110.
• KeyBanc Capital Markets analyst Eric Gonzalez maintained a Sector Weight rating on the stock.
• Stephens analyst Joshua Long reaffirmed an Equal-Weight rating and price target of $103.
• William Blair analyst Sharon Zackfia reiterated an Outperform rating on the stock.
• Wedbush analyst Nick Setyan reiterated a Neutral rating and price target of $110.

Check out other analyst stock ratings.

RBC Capital

“With U.S. (and overall North America) comp growth of +12%, and China comp growth accelerating to +30% by March, we think 2FQ results met the high bar,” Carril said in a note.

Given the company’s strong fiscal second-quarter results, the unchanged full-year guidance suggests “uncertainty looking ahead,” he added.

KeyBanc

Starbucks’ quarterly results were “largely driven by a faster than anticipated recovery in China,” Gonzalez stated.

“Despite China upside, Starbucks reiterated its FY23 guidance, implying some moderation growth in F2H23,” he added.

Stephens

“We are impressed with the company's ability to optimize its operations towards changing consumer preferences around increased convenience,” Long wrote in a note.

“During the second half of the year, we expect strong comps and accelerating margins driven by continued execution in the U.S., improving China results, and operating initiatives taking hold within the current operating environment,” he added.

William Blair

“All told, consolidated same-store sales rose 11%, well ahead of consensus of 7% and our 8% estimate,” Zackfia said. The company’s total revenues grew 14%, with 6% net unit expansion and 26% licensed revenue growth.

“Despite the second-quarter upside, full-year guidance was reiterated given management’s caution on potential consumer headwinds, although our follow-up call suggested Starbucks is not yet seeing any direct impact with continued strong momentum—which could leave ample room for upside should Starbucks remain resilient,” she added.

Wedbush

The company’s fiscal 2023 guidance for US same-store sales growth of 7%-9% implies “2H SSS growth below current expectations,” Setyan said.

“We continue to expect improved customer mobility, investments in staffing levels/training, operational initiatives aimed at increasing capacity and throughput, and favorable loyalty changes to drive SSS growth in the near- to medium-term,” he added.

SBUX Price Action: Shares of Starbucks opened at $108.85 on Wednesday and tanked by more than 6.8% at the time of writing.

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