Starbucks (SBUX) stock headed sharply lower early Wednesday, even as analysts raised price targets following a stronger-than-expected second-quarter report delivered late Tuesday.
XStarbucks stock slumped 9% in Wednesday's market trade. Ahead of earnings On Tuesday, shares dipped 0.1% to 114.46, right around 52-week highs. As SBUX shares headed south, multiple firms increased Starbucks stock price targets early Wednesday.
Credit Suisse (CS) increased its price target to 128, up from 122, and kept an "Outperform" rating on the shares. Analyst Lauren Silberman noted Starbucks delivered an "impressive" Q2 but chose to maintain its full year 2023 guidance for EPS growth at the low end of 15%-20%.
Credit Suisse views this more as conservatism rather than any change in underlying fundamentals amidst uncertainty in the macro environment. Silberman wrote that any Starbucks stock pullback could be viewed as a buying opportunity.
Meanwhile, JPMorgan (JPM) lowered its stock price target to 113, down from 114, and maintained an "Overweight" rating on the shares. The firm told investors it prefers to add Starbucks stock around 100.
The Seattle-based coffee megalith operates more than 36,000 stores worldwide. It has established itself as a titan in the coffee roasting and coffee retail space. But it has recently been dealing with turbulence.
Former CEO Howard Schultz in March ended his third stint at the head of the company, most recently on an interim basis. He was replaced by Laxman Narasimhan on March 20, ahead of the expected timing.
Meanwhile, since late 2021, workers at more than 280 U.S. Starbucks locations have voted to unionize, kicking off a wave of media attention on unionization efforts in the U.S. However, Starbucks management has reportedly been reluctant to agree to collective-bargaining contracts.
SBUX broke out of a cup pattern with an official 110.93 buy point on March 26. Shares have advanced steadily ahead of earnings. SBUX stock currently sits around 4% above the 110.93 entry point.
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Starbucks Stock: Earnings
Estimates: Analysts predicted earnings jumping 10% to 65 cents per share in the second quarter. Wall Street saw revenue also growing 10%, to $8.41 billion. Same-store sales were expected to grow 7.3%, up sequentially from 5% in Q1 and from 7% a year ago, according to FactSet.
Results: Starbucks reported revenue increasing 14% to $8.7 billion in Q2. The company earned 74 cents per share, growing 25% compared to last year. Meanwhile, global same-store sales jumped 11%, increasing 12% in North America and 7% in the international market.
Same-store sales in China grew 3% as Starbucks opened 464 new stores worldwide in Q2, including 153 in China.
"From my immersion observations, our leadership team now has a clear line of sight into our growth headroom, as well as our opportunities to enhance margins and modernize the business, brand, partner experience and culture of Starbucks," Narasimhan said Tuesday in a statement.
In early February, Starbucks narrowly missed Q1 earnings and revenue estimates. Starbucks earned 75 cents per share on $8.71 billion in revenue in the first quarter.
The company blamed weak international demand. In China, Starbucks' second-largest market, purchases at cafes that had been open at least 13 months fell 28%.
China ended its zero-Covid policy during Starbucks' Q1. Schultz told investors that more than 1,800 of Starbucks' 6,090 locations at the time in China closed at the height of Covid cases.
Despite the Q1 performance dent from China, Starbucks executives maintained their prior 2023 guidance. Starbucks expects revenue growth of 10%-12% and adjusted EPS growth on the low end of 15%-20% for fiscal 2023.
Starbucks stock ranks 19th in IBD's Retail-Restaurant industry group. Shares have a 83 Composite Rating out of 99. SBUX has a 94 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement. The EPS rating for Starbucks stock is 49.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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