Starbucks Explores Partnerships In China Where Same-Store Sales Are 'Not Good': 8 Analysts Provide Q3 Takeaways

Shares of Starbucks Corp SBUX were climbing in early trading on Wednesday, despite the company reporting downbeat fiscal third-quarter sales.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

• Wedbush analyst Nick Setyan reiterated a Neutral rating, while raising the price target from $77 to $80.
• Goldman Sachs analyst Christine Cho maintained a Buy rating and price target of $100.
• BMO Capital Markets analyst Andrew Strelzik reaffirmed an Outperform rating and price target of $100.
• Piper Sandler analyst Brian Mullan reiterated a Neutral rating and price target of $85.
• Stifel analyst Chris O’Cull maintained a Hold rating and price target of $80.
• Oppenheimer analyst Brian Bittner reaffirmed a Perform rating on the stock.
• KeyBanc Capital Markets analyst Eric Gonzalez reiterated a Sector Weight rating on the stock.
• Bank of America analyst Sara Senatore maintained a Buy rating and price target of $112.

Check out other analyst stock ratings.

Wedbush: Starbucks reported its adjusted earnings at 93 cents per share, slightly missing the consensus of 94 cents per share, Setyan said in a note. While U.S. same-store sales (SSS) growth came in-line, International SSS growth missed consensus, with a softer performance in China, he added.

Management reiterated their full-year SSS growth guidance for fiscal 2024, but the visibility for fiscal 2025 "remains limited," the analyst stated. "We believe SBUX’s current valuation appropriately reflects increasingly limited NT top- and bottom-line visibility, offset by some level of confidence in management’s ability to deliver longer-term annual operating margin expansion and EPS growth in line with the brand’s equity," he further wrote.

Goldman Sachs: The company's total revenues of $9.11 billion came in 1% below consensus, due to lower-than-expected SSS growth, Cho said. She added, however, that operating margins of 16.7% came in above consensus of 16.4% on better cost management.

Although Americas segment recorded a second consecutive quarter of negative year-on-year traffic, there was a sequential improvement, the analyst stated. "The China market continues to be challenging, with the company seeing more cautious consumer spending coupled with intensified competition," she further wrote.

BMO Capital Markets: Starbucks delivered a quarterly performance that was broadly in-line with expectations, "with the exception of greater G&A savings," Strelzik said. Sales trends remained under pressure, "despite SBUX launching several U.S. sales platforms in the quarter," he added.

"We are encouraged by the progress SBUX is realizing on labor, as well as its efficiency initiatives that are cushioning EPS against the sales challenges," the analyst wrote. The company said it was exploring strategic partnerships in China, which is "an unexpected piece of new information," he added.

Piper Sandler: "As we believe investors expected, SSS in each of its two key markets were soft; coming in at down 2% and down 14% in the U.S. and China, respectively," Mullan wrote in a note. The US performance suggests that the company could continue to struggle in the current quarter.

“In China, while the down 14% result was below consensus and was definitely ‘not good,’ we note that ‘versus 2019’ SSS stack was ~flattish sequentially, so we'd just offer that it could have been worse,” the analyst wrote.

Stifel: Starbucks' results were better than what many investors feared, O’Cull said. Despite total revenues missing estimates, the company managed to report earnings in-line with Street expectations on lower-than-expected G&A expenses, he added.

"The company reaffirmed its FY24 guidance with one quarter left and indicated cost containment should continue benefiting margin, likely boosting shareholders’ confidence," the analyst wrote. Although management cited several actions to lift transactions, many of these were in place in the fiscal third quarter and the "magnitude of the decline in transactions in the U.S. was still alarming," he further stated.

Oppenheimer: "Following SBUX’s 3Q24 update, we remain on the hunt for signs that business trends have stabilized and earnings revisions have bottomed before reverting to a bullish stance," Bittner wrote. There are limited near-term catalysts to boost domestic traffic, while China's deceleration is steep, he added.

"A less cautious thesis requires an identifiable path for positive earnings revisions," the analyst stated.

KeyBanc Capital Markets: For the US business, the company cited "price and multi-beverage orders helping to drive ticket, while traffic was more pressured by non-Starbucks Rewards customer trends," Gonzalez said.

"Looking ahead, the Company will continue to focus on areas such as store operations (e.g., Siren Craft System), as well as broadening its customer focus (including beyond Starbucks Rewards members) to drive top-line improvement in F4Q and beyond," the analyst wrote. Trends in China remain under pressure, partly due to competition, he added.

BofA Securities: Starbucks' US comps improved sequentially and came in-line with consensus, Senatore said. She added that better transaction trends suggest "promotions and menu innovation are gaining traction."

"With SBUX seeing increased frequency across every Rewards Member decile, the opportunity lies in expanding reach to non-SR members (~60% of customers); more paid advertising should help," the analyst further wrote.

SBUX Price Action: Shares of Starbucks had declined by 3.50% to $78.60 at the time of publication on Wednesday.

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