Gold prices steady ahead of Fed decision; weekly weakness noted
Investing.com-- Analysts at CFRA have lowered their price target for Starbucks Corporation (NASDAQ:SBUX), citing ongoing margin pressures, weaker traffic trends, and increasing competition.
The brokerage cut PT by $18 to $85, and downgraded the rating to "Sell" from "Hold" after Starbucks posted its first-quarter results.
In its latest earnings report, Starbucks posted flat first-quarter revenue of $9.4 billion, while operating margins contracted by 380 basis points year-over-year to 11.9%.
Adjusted earnings per share (EPS) declined 24% to $0.69, narrowly beating consensus estimates by $0.02. Same-store sales fell 4% globally, with a 6% decline in traffic partially offset by a 3% increase in average ticket size.
However, CFRA analysts believe this pricing-driven growth is unsustainable and that traffic recovery will take time.
Higher store operating expenses, driven by investments in store expansion and labor, weighed on profitability, expanding by 390 basis points year-over-year, analysts said.
CFRA remains skeptical about the effectiveness of Starbucks’ recent operational changes, such as alternative milk charges, new store markers, and menu simplifications, in meaningfully improving margins.
It also highlighted additional risks, including rising coffee prices, political uncertainty surrounding tariffs, and increasing competition in the coffee sector.
Given these challenges, CFRA analysts see limited upside for Starbucks’ store growth strategy and expect margin headwinds to persist longer than previously anticipated.