EU and US could reach trade deal this weekend - Reuters
On Friday, Bernstein SocGen Group updated their outlook on Starbucks (NASDAQ:SBUX) shares, reducing the price target from $115.00 to $105.00, while keeping an Outperform rating on the stock. The adjustment follows a significant 11% drop in Starbucks shares, which analyst Danilo Gargiulo attributes to investor concerns over the impact of new reciprocal tariffs on the company’s recovery efforts.
Starbucks’ stock decline is seen as a rapid response to the potential incremental harm that tariffs could impose on the company’s turnaround strategy. Gargiulo provided insights into investor feedback and offered a different perspective on why Starbucks might ultimately strengthen despite these challenges. He noted that heightened uncertainty and potential recession could affect Starbucks, as consumer trends during economic downturns historically have complicated such turnaround efforts. However, he believes that an inflation-driven recession might not have the same impact on Starbucks as the Global Financial Crisis (GFC) did, given that it may primarily affect lower-income cohorts, thereby partially insulating Starbucks from a similar demand decrease.
The analyst also addressed concerns about investing in a company undergoing transformation during a recession. While some investors are wary, Gargiulo suggested that Starbucks has multiple "low-hanging fruits" that provide clear opportunities and internal controls to navigate the business, contrasting with other companies that might be more vulnerable to external market forces.
Finally, the impact of tariffs on the cost of goods sold (COGS) was discussed, especially considering rising coffee prices. Gargiulo pointed out that coffee beans represent 10-15% of Starbucks’ overall Product and Distribution cost. He highlighted that Starbucks primarily relies on Arabica beans sourced from Latin American countries like Brazil and Colombia, which currently face minimal tariff rates. This contrasts with Vietnam, a major producer of the cheaper Robusta beans, which are facing higher tariffs.
In summary, while acknowledging the challenges posed by tariffs and potential recessionary trends, Bernstein SocGen Group maintains a positive outlook on Starbucks, underlining the company’s capacity to navigate through these headwinds and continue its turnaround. The revised price target reflects these considerations, balancing current market conditions with the strategic initiatives Starbucks is undertaking.
In other recent news, Starbucks Corporation announced a quarterly cash dividend of $0.61 per share, set to be paid on May 30, 2025, to shareholders of record as of May 16, 2025. Additionally, Jefferies maintained its Underperform rating on Starbucks stock, with a price target of $76.00, citing a cautious outlook from CEO Brian Niccol. At the 2025 Annual Meeting, Starbucks shareholders elected all nine director nominees and approved an advisory resolution on executive compensation, while several shareholder proposals did not pass. CEO Brian Niccol also introduced the "Back to Starbucks" business plan, focusing on enhancing customer experience and store atmosphere, with an emphasis on U.S. operations and potential international growth. In leadership changes, Starbucks appointed Cathy R. Smith as the new chief financial officer, succeeding Rachel Ruggeri. Smith brings extensive experience from her previous roles at Nordstrom (NYSE:JWN), Bright Health Group, and Target Corporation (NYSE:TGT). Niccol expressed optimism about Smith’s ability to contribute to the company’s strategic initiatives. These developments reflect Starbucks’ ongoing efforts to strengthen its business and maintain shareholder value.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.