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Tuesday, Guggenheim Securities adjusted its outlook on Starbucks Corporation (NASDAQ:SBUX), reducing the coffee giant’s price target from $95 to $83 while sustaining a Neutral rating on the stock. The firm’s analyst cited a revision of the company’s earnings per share (EPS) estimates for the fiscal years 2025, 2026, and 2027, expressing diminished confidence in Starbucks’ ability to achieve a previously expected margin improvement. According to InvestingPro data, 16 analysts have recently revised their earnings estimates downward, while the company maintains a P/E ratio of 27.1x and a market capitalization of $95.3 billion.
Ahead of Starbucks’ second-quarter fiscal year 2025 earnings report scheduled for the evening, Guggenheim has scaled back its EPS forecasts to $2.80 for 2025 and $3.10 for 2026, down from the previous estimates of $2.90 and $3.45, respectively. The firm’s projection for 2027 EPS is now set at $3.50, which falls short of the $4.15 consensus. The revision reflects a more conservative stance on the company’s potential two-year margin expansion of over 200 basis points—a key factor previously incorporated into Guggenheim’s model. InvestingPro analysis indicates the company’s current gross profit margin stands at 26.12%, with an overall Financial Health Score rated as "FAIR."
The rationale behind the price target reduction lies in the application of a 26x price-to-earnings (P/E) multiple to the company’s 2027 earnings, discounted back at a rate of 10%. This methodological approach underpins Guggenheim’s valuation of Starbucks shares and informs its ongoing Neutral rating.
The announcement comes as investors and analysts alike anticipate Starbucks’ financial performance update, which will provide a clearer picture of the company’s current trajectory and future prospects. The revised targets and estimates by Guggenheim signal a cautious perspective on Starbucks’ ability to enhance profitability and deliver on growth expectations in the near to medium term.
In other recent news, Starbucks Corporation has been the focus of multiple analyst adjustments and corporate developments. Bernstein SocGen Group reaffirmed an Outperform rating with a $105 price target, maintaining confidence in Starbucks’ ability to navigate challenges in China despite a decline in market share. Conversely, Citi analysts lowered their price target for Starbucks from $100 to $88, citing operational and macroeconomic challenges, including labor investments and coffee inflation. Jefferies upgraded Starbucks from Underperform to Hold, setting a new price target of $76, reflecting a more neutral stance amid expectations of improved earnings visibility. Baird analysts, however, downgraded the stock from Outperform to Neutral, reducing the price target to $85 due to concerns over near-term earnings risks.
Starbucks also announced a dress code update for North American baristas, requiring solid black tops and specific denim colors to create a more uniform appearance across its cafes. This change is part of CEO Brian Niccol’s strategy to enhance the customer experience and boost sales. Despite these operational adjustments, Starbucks continues to face competitive pressures in China, where local chains have impacted its market share and revenue. As the company moves forward, these developments highlight the complexities Starbucks faces in maintaining its global presence and financial performance.
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