Starbucks is jolted by a rare bear call from Wall Street

Jefferies downgraded Starbucks Corporation (NASDAQ:SBUX) to an Underperform rating on Tuesday, after having it set at Hold. Analyst Andy Barish and his team think that while the new Brian Niccol will make necessary strategic changes to move the coffee chain in the right direction, the execution will be challenged as issues like operations, culture, value perception, and tech take time to fix.

For investors, the implementation of the Niccol plan means that FQ4 and FY25 guidance may not be encouraging, warned Barish. The next Starbucks (SBUX) earnings report is seen including below-consensus guidance updates and FY25 was called a potential “throwaway” year of reinvesting in the company, stabilizing, and then attempting to accelerate the business.

“We view the stock’s gains since Niccol’s hire and current valuation at 23x F26E P/E as overdone given the tough road ahead to improving the biz and premium to asset-lite peers,” highlighted Barish.

Jefferies has a base case price target of $76 on SBUX and an upside scenario PT of $110. Notably, the firm is the only notable bear on Wall Street on Starbucks (SBUX). The analyst ratings scorecard now shows 18 Buy-equivalent ratings on SBUX, 16 Hold-equivalent ratings, and 1 Sell-equivalent rating. On Seeking Alpha, analyst Gary Alexander has a new Sell rating in place on SBUX.

Shares of Starbucks (SBUX) fell 0.77% in premarket trading to $94.91 vs. the 52-week range of $71.55 to $107.66.