JPMorgan Says Starbucks Valuation Has Become 'Beyond A Stretch'

After seeing shares increase over 50% year to date, Starbucks Corporation SBUX has received a downgrade.

The Analyst

JPMorgan's John Ivankoe downgraded Starbucks from Overweight to Neutral and maintained a $91 price target.

The Thesis

Ivankoe says Starbucks valuation has become "beyond a stretch" and data checks suggested a comp lower than the 7% reported in the U.S.

"2020 will see a significant moderation in overall comps back to the 3-4% range with ticket being driven by modest price as well as Nitro which will complete its US company store rollout by the end of September," the analyst wrote in the note.

CEO Kevin Johnson said stores offering Nitro in 2017 had seen “approximately one point of comp growth."

Ivankoe said in recent industry notes& the firm suggested investors add lower as he believed peaking third-quarter comps would allow an easing in the share price.

“In fact, the opposite with post-EPS performance propelling the stock up 9% - its biggest one-day gain since November 2, 2018 - and to levels well above even out $91 December 2020 price target,” he wrote.

Price Action

Starbucks shares traded lower by 1.14% at $97.98 Monday afternoon.

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