Jefferies Slashed Starbucks Rating to Underperform

Jefferies analysts downgraded Starbucks (NASDAQ:SBUX) to Underperform from Hold, lowering their price target on the stock to $76 from $80.

The analysts expressed concerns that while Starbucks' new CEO has indicated potential strategic changes, execution may face significant challenges. Issues related to operations, company culture, value perception, and technology improvements are expected to take time to address. They also anticipate a reset in fiscal 2025 guidance to reflect lower single-digit EPS growth, well below the consensus of 11-12% growth.

This ongoing pressure from negative same-store sales (SSS) in both U.S. and international markets could weigh on the stock, with Starbucks’ current price-to-earnings (PE) ratio of 25x expected to move closer to its 23x peers and below the implied 21x two-year forward PE. The new price target of $76, based on a 19x fiscal 2026 PE, suggests a 20% potential downside.