As Starbucks Corp SBUX inches closer to revealing its first quarter earnings on Jan. 30 after market hours, analysts have begun evaluating the company to update their investment stance.
Starbucks stock has declined over 10% in the past year, likely due to inflationary pressures present for most of 2023.
While the 50-day SMA has been edging toward the 200-day SMA, it seems to be falling short of crossing over it at this point. A crossover would be positive for the stock. Let’s examine the volumes for further insights.
The on-balance volume (OBV) indicator has been declining since mid-November. The OBV usually decreases when volume on down days is greater. Therefore, a declining OBV indicates negative volume pressure that may foreshadow lower prices.
Thus, technical indicators reflect mixed sentiments toward Starbucks’ stock. Now, let’s delve into the perspective of an analyst who recently examined the stock, particularly in relation to Starbucks’ upcoming earnings and outlook.
The Starbucks Analyst: Piper Sandler analyst Brian Mullan gave a Neutral rating to the stock while reducing his price target from $107 to $100 per share.
The Starbucks Thesis: Piper Sandler’s analysis of Starbucks revealed mixed sentiments. Despite the apparent “poor sentiment” and potential near-term challenges, the company’s valuation compared favorably to historical trends.
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As the company approaches reporting its first quarter fiscal year 2024 earnings, Mullan observed the company achieving adjusted EPS guidance for fiscal 2024 due to its cost-saving initiatives, even if same-store sales (SSS) fall short of consensus.
Analysts’ concerns about the U.S. consumer and restaurant industry traffic in the first half of 2024 are contributing to hesitations. The lack of clarity on Starbucks’ China business and uncertainty about future SSS trends in the region further complicates the outlook.
Consequently, the recommendation of Neutral with an updated price target, suggested around 8% upside.
Mullan acknowledged positive risk-reward dynamics and relative value but expressed reservations about absolute upside potential. “Even if one were to ‘haircut’ consensus adjusted EPS for 2025e significantly, the stock is trading at ~20x forward earnings, and that seems too inexpensively priced for a business of this caliber,” he noted.
SBUX Price Action: Starbucks stock was trading up 0.080% at $93.42 on Friday at publication. Its 52-week range is $89.21 and $115.48.
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