Stephens' Restaurant Analyst Parses Starbucks' 'Ho-Hum' Quarter

Starbucks Corporation SBUX reported "ho-hum" earnings Thursday, Stephens' restaurant analyst Will Slabaugh said during a CNBC interview.

The Analyst

Slabaugh discussed Starbucks' Q2 as a guest on CNBC's "Squawk Box" segment Friday morning. (See the analyst's track record here.)

The Thesis

Starbucks previously guided its U.S. and China comp expectations in June, and investors were treated to a "ho-hum" earnings report Thursday that fell in-line with expectations, Slabaugh said.

A 2-percent comp decline in China comes at a time when Starbucks is "shifting the growth story" to what is supposed to be a fast-growing market, the analyst said. 

Starbucks communicated a multiyear growth story in China to the point where the business would rival the U.S. in terms of size, Slabaugh said. But now investors have reason to question the "health" of the Chinese business, as it is showing disappointing numbers in what is supposed to be a growth story, he said. 

Starbucks shares are is trading near the low-end of their five-year valuation range, so at the very least the American business needs to become "a little bit better" before buying the stock, Slabaugh said. This hasn't occurred yet across various initiatives such as mobile orders, which are growing at a mid-double-digit rate, but not flowing through to same-store sales growth, he said. 

Price Action

Starbucks shares were trading up slightly Friday morning at $51.48. 

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