As Starbucks Corp SBUX approaches its first-quarter earnings report on January 30 after the market closes, analysts are re-evaluating the company to adapt their investment positions.
Starbucks stock has slumped over 10% in the past year, likely due to persistent inflationary pressures throughout 2023.
While the 50-day SMA is edging towards the 200-day SMA, it is hesitant to cross it. A crossover would bode well for the stock. Let’s dissect the implications of the trading volumes.
The on-balance volume (OBV) indicator has been on a downward trajectory since mid-November. The OBV tends to dip when volume on down days is strong. Therefore, a declining OBV reflects negative volume pressure, which could forecast lower prices.
Thus, the technical indicators convey a mixed sentiment regarding Starbucks’ stock. Now, let’s delve into the evaluation of an analyst who recently scrutinized the stock, focusing on Starbucks’ imminent earnings and the company’s future outlook.
The Starbucks Analyst: Piper Sandler analyst Brian Mullan has given the stock a Neutral rating while lowering his price target from $107 to $100 per share.
The Starbucks Assessment: Piper Sandler’s analysis of Starbucks has revealed an ambiguous sentiment. Despite exhibiting a perceived “poor sentiment” and possible short-term obstacles, the company’s valuation compares favorably to its historical trends.
As the company heads toward reporting its first-quarter 2024 earnings, Mullan envisages the company achieving adjusted EPS guidance for fiscal 2024, considering the company’s cost-saving measures, even if same-store sales (SSS) fall short of consensus.
Worries about the U.S. consumer and traffic in the restaurant industry during the first half of 2024 contribute to analysts’ reservations. The lack of clarity regarding Starbucks’ business in China and uncertainty about future SSS trends in the region further complicates the outlook.
As a result, the Neutral recommendation with the updated price target implies roughly an 8% upside.
Mullan acknowledged positive risk-reward dynamics and relative value but voiced hesitations about absolute upside potential: “Even if one were to ‘haircut’ consensus adjusted EPS for 2025, a fair bit, the stock is trading at ~20x forward earnings, and that seems too cheap for a business of this caliber,” he stated.
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.
Sources: Photo: Shutterstock
