Starbucks shares may be due for some downside, according to Jefferies. Analyst Andy Barish downgraded the stock to underperform from hold and cut its price target by $4 to $76. That implies more than 20% downside from Monday’s close. While the analyst believes the coffeehouse chain’s new CEO Brian Niccol — who was named to the position back in August — signals that “necessary strategic change is now on the table,” Barish still expects execution to be “challenged,” as issues pertaining to operations, culture, value perception and tech will “take time to fix.” He also expects the company’s upcoming fourth-quarter earnings report, which is projected to be released Oct. 31, will spell bad news for the company and be a negative catalyst for the stock. While shares have already fallen about 0.6% this year, they have surged around 24% since the CEO announcement. SBUX mountain 2024-08-13 SBUX since CEO change “We find this gain to be too much too soon when very little is known about Mr. Niccol’s plans so early in his tenure, which just began weeks ago,” the analyst wrote in a Tuesday note. “We find the culture, human capital and market positioning of the SBUX brand as challenged, and this turn, given its size, complexity and global scale ( what to do with China is not considered in this work at this point), will take a significant amount of time and investment, in our view.” Barish expects there to be low visibility in China and the U.S. in the near term and sees fiscal 2025 guidance coming in lower than expected. He thinks the long-term growth algorithm should be revised lower as well. “With a lot of uncertainty over the next 12 months, potentially with some mgmt announcements that provide some ‘bench building’ comfort as Mr. Niccol builds out his team, the big run in the past ~6 wks leaves us feeling like the stock will stall here and begin to retrace the ‘Niccol gains’ particularly as fundamentals become more of the focus,” he said.
