Starbucks (SBUX) stock was down in pre-market trading today after a rating downgrade from renowned research firm Jefferies. Analyst Andy Barish downgraded SBUX stock to a “Sell” rating from a “Hold,” citing operational concerns. The analyst maintained a Street-Low price target of $76 on SBUX, which implies 17.9% downside potential from current levels.
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Barish ranks #621 out of 9,873 analysts tracked on TipRanks. He has a 57% success rate and an average return per rating of 9.80%.
Here’s Why Jefferies Remains Bearish on SBUX
Barish believes that Starbucks has already exceeded reasonable expectations in improving its fundamentals and therefore sees no further upside for the stock. Accordingly, the analyst maintains below-Street estimates in his model for the coffee-chain. Additionally, Barish noted that data from credit and debit cards, foot traffic, and app usage metrics suggest a potential downward revision for Starbucks’ Q3 and Q4 U.S. comparable sales estimates.
Moreover, the analyst noted that Starbucks’ ongoing “complex” personnel and operational challenges could require more time to resolve than previously anticipated. He added that the company’s significant investments continue to weigh on its earnings. These factors have compelled the analyst to downgrade the stock and maintain one of the Street’s lowest price targets for Starbucks at $76.
At the same time, Barclays analyst Jeff Bernstein lowered his price target on SBUX from $108 to $106 but maintained his “Buy” rating. In an industry-wide update, Bernstein noted that comparable store sales picked up during the quarter, mainly because of value deals. Moreover, casual dining restaurants did better, but quick service restaurants fared poorly.
Is Starbucks Stock a Good Buy Right Now?
Currently, analysts remain divided about Starbucks’ long-term outlook. On TipRanks, SBUX stock has a Moderate Buy consensus rating based on 13 Buys, 11 Holds, and one Sell rating. The average Starbucks price target of $95.64 implies 3.4% upside potential from current levels. Year-to-date, SBUX stock has gained 2.7%.
