Starbucks Fails To Serve Hot Results, Brewing Analyst Concerns Over China Sales, Boycott Effects

Shares of Starbucks Corp SBUX were trading lower on Wednesday after the company reported its first-quarter results short of expectations.

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

Wedbush On Starbucks

Analyst Nick Setyan maintained a Neutral rating and price target of $75.

Starbucks reported its fiscal first-quarter earnings below expectations on lower-than-expected same-store sales growth and operating margin, Setyan said in a note. “FQ2 guidance implies a LSD U.S. comp and negative China comp, but management expects a full recovery in 2H,” he added.

The company’s full-year guidance is “questionable” as its first-quarter results and second-quarter guidance disappointed, the analyst further stated.

Stephens On Starbucks

Analyst Joshua Long reiterated an Equal-Weight rating and price target of $110.

Starbucks reported China same-store sales of +10% for the first quarter, which came in significantly below Street expectations of +17.4%, with performance being impacted by a “more cautious consumer environment,” Long said.

“Over the longer term, we view China as a significant growth opportunity for Starbucks' strong brand and secular tailwinds driven by increasing per capita coffee consumption (now at just ~12 cups per year in China) relative to Japan & U.S. at ~200 & ~380 cups/year, respectively,” he added.

Check out other analyst stock ratings.

TD Cowen On Starbucks

Analyst Andrew Charles reaffirmed a Market Perform rating and price target of $102.

Starbucks’ first-quarter results were “not as bad as feared,” Charles said. He added that the second quarter guidance reflects earnings growth would be back-end loaded in 2024.

Investors rewarded the stock with management maintaining their 2024 EPS growth guidance of 15%-20%, “albeit with lower U.S. & China comps,” the analyst further wrote.

William Blair On Starbucks

Analyst Sharon Zackfia maintained an Outperform rating on the stock.

“While October global sales exceeded internal expectations across all metrics, sales weakened in mid-November,” Zackfia said in a note.

Starbucks faced significant disruptions in the Middle East, softer U.S. traffic “following social media calls for a boycott related to the Israel/Hamas war,” and a weaker-than-expected recovery in China due to “a cautious consumer and a more promotional competitive environment,” he added.

KeyBanc Capital Markets On Starbucks

Analyst Eric Gonzalez reiterated a Sector Weight rating on the stock.

“SSS results fell short of the Street’s forecast in both the N.A. and International segments,” Gonzalez wrote in a note. “On the plus side, U.S. SSS growth of 5% was likely ahead of investor expectations, and the Company delivered better than expected margin expansion in the N.A. segment,” he added.

Starbucks lowered its revenue guidance due to softer-than-expected first-quarter results and ongoing softness in January, while maintaining its full-year earnings growth outlook, the analyst further stated.

SBUX Price Action: Shares of Starbucks were down 0.6% to $93.42 at the time of publication Wednesday.

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