On Thursday, Guggenheim adjusted its outlook for Starbucks Corporation (NASDAQ:SBUX), listed on NASDAQ:SBUX, by reducing the stock's price target from $100 to $91, while continuing to endorse the stock with a Buy rating. The revision comes as the firm anticipates Starbucks to face a tougher environment, which has led to a reevaluation of sales and earnings projections ahead of the company's second-quarter 2024 results.
The firm cited several factors contributing to the revised forecast, including industry-wide challenges and specific issues such as consumer boycotts and heightened competition. These elements have influenced the firm's perspective on the coffee giant's near-term financial performance.
Despite the lowered price target, Guggenheim's stance on the stock remains positive, highlighting Starbucks' valuation at 22 times the firm's calendar year 2024 earnings estimate as reasonable. The firm also pointed to Starbucks' continued mid-single digit unit growth as a supportive factor for the Buy rating.
However, Guggenheim expressed caution regarding the immediate potential for stock accumulation, noting the difficulty in finding compelling reasons to do so given the significant downside to consensus earnings per share (EPS) expectations. The firm's decision to adjust the price target downward reflects a change in the earnings multiple applied, moving from 24 times to 23 times the lowered EPS estimate.
Guggenheim's revised price target and maintained Buy rating signal a nuanced view of Starbucks' position in the market, taking into account both the growth prospects and the current challenges faced by the brand.
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