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Starbucks Stock: Growth Hopes Dim, Risks Rise
18 Mar
Summary
- Starbucks stock downgraded by RBC Capital Markets to sector perform.
- Analyst notes higher-than-expected investments needed for US business turnaround.
- Stock's current valuation offers a balanced risk-reward ratio, according to RBC.
RBC Capital Markets has downgraded Starbucks shares to 'sector perform,' citing concerns over lofty investor growth expectations and a balanced risk-reward ratio. Analyst Logan Reich maintained a $105 price target, indicating an 8% upside from Tuesday's closing price.
Reich highlighted that Starbucks requires more substantial and enduring investments than previously anticipated to turn around its U.S. business. Furthermore, the analyst pointed to a lack of clarity regarding cost savings and subsequent margin improvements as a significant headwind.
Despite achieving its same-store sales growth targets for fiscal year 2028, the required investments are proving to be larger. Investor expectations for continued top-line improvement and solid execution are considered elevated, leaving Starbucks with less room to exceed these forecasts.
Starbucks stock has seen a 16% increase year-to-date, though it has traded slightly below flat over the past twelve months. RBC's analysis suggests that at its current price levels, Starbucks stock is trading at a premium to historical averages, presenting a balanced risk/reward scenario through fiscal year 2035.
