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On Friday, Citi analysts adjusted their outlook on Starbucks Corporation (NASDAQ:SBUX), lowering the price target from $100.00 to $88.00 while maintaining a Neutral rating on the company's shares. The revision reflects a more cautious view of the coffee chain's near-term financial performance amid a range of operational and macroeconomic challenges. Currently trading at $84.60, with a market capitalization of $96.1 billion, InvestingPro data shows Starbucks is fairly valued based on its proprietary Fair Value model. The stock maintains a P/E ratio of 27.27x and offers a dividend yield of 2.88%.
The analysts highlighted several key questions ahead of Starbucks' expected second-quarter fiscal year 2025 earnings release on April 29, after the market close, with a conference call scheduled for 5 PM ET. Among the focal points are the results from labor investments in approximately 700 stores, the impact of headcount reductions and supply chain initiatives, coffee inflation, tariff exposure, and broader macroeconomic risks, including potential effects on unit growth in critical markets such as India. InvestingPro analysis indicates the company's overall financial health score is FAIR, with particular attention needed to short-term obligations exceeding liquid assets, as revealed in one of several exclusive ProTips available to subscribers.
Recent footfall data indicates an improvement in the second quarter with a 0.3% year-over-over increase, contrasting with a 3.2% decline in the first quarter. However, the analysts noted that momentum has decelerated since a spike in January, and app usership has shown a downward trend, with a four-week moving average dropping approximately 15% from recent highs. Despite these challenges, Starbucks maintains strong fundamentals with annual revenue of $36.15 billion and has consistently maintained dividend payments for 16 consecutive years, as highlighted in InvestingPro's comprehensive analysis.
In terms of commodity costs, while coffee prices have receded from their peak of $4.20 per pound to the $3.80-$3.90 range, concerns about the impact of tariffs remain. The analysts have revised their earnings per share estimates for fiscal years 2025 and 2026 to $2.56 and $3.13, respectively, down from previous estimates of $2.61 and $3.21. This adjustment is due to weaker same-store sales expectations and the uncertainties surrounding cost cuts versus reinvestment needs, without explicitly modeling the potential effects of coffee inflation. For deeper insights into Starbucks' financial health and detailed analysis, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro, covering over 1,400 top US stocks.
The new price target of $88.00 is based on a 15 times multiple, which remains unchanged at approximately 1.1 times the market, applied to the analysts' next twelve months EBITDA estimate, looking ahead from now.
In other recent news, Starbucks Corporation has announced a quarterly cash dividend of $0.61 per share, demonstrating its commitment to returning value to shareholders. On the earnings front, Jefferies has maintained its Underperform rating on Starbucks, with a price target set at $76.00, highlighting concerns over the company's future earnings visibility. Meanwhile, Baird downgraded Starbucks from Outperform to Neutral and reduced the price target to $85.00, driven by apprehensions about near-term earnings risks and challenges in meeting consensus projections. Bernstein SocGen Group also adjusted its outlook, lowering the price target from $115.00 to $105.00, citing concerns over the impact of tariffs and potential recessionary trends on Starbucks' recovery efforts.
Jefferies analyst Andy Barish upgraded Starbucks from Underperform to Hold, with a revised price target of $76.00, recognizing the challenges but suggesting limited downside from current valuation levels. Despite the downgrade from Baird, the firm expressed confidence in Starbucks' long-term turnaround strategy under CEO Brian Nicol, though near-term earnings could be affected by macroeconomic headwinds. Additionally, Bernstein's analyst Danilo Gargiulo noted that Starbucks might navigate through the current challenges due to its strategic initiatives and internal controls. These recent developments indicate a cautious yet hopeful outlook from analysts as Starbucks continues its efforts to stabilize and grow its financial performance.
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