Jefferies says sell Starbucks over high valuation, ‘questionable strategic priorities’
Investors should dump Starbucks , according to Jefferies. The research firm downgraded the coffee chain to underperform from hold. Analyst Andy Barish’s $76 price target also signals downside of 18% from Wednesday’s close. Shares have rallied more than 13% over the past three months, a move which Barish thinks is disconnected from the company’s reality. “We think expectations have once again settled too far ahead of reality: no strong evidence yet (in comps or margins) of meaningful and lasting fundamental improvements to the business, significant investments needed near-and medium-term into people & tech that could weigh on margins/earnings, and some questionable strategic priorities (ex: lack of focus on cold bevs & drive thrus, where much of the industry is focused on, vs hot bevs & in-store experience) in the face of an uncertain macro,” the analyst said. SBUX YTD mountain Starbucks stock in 2025. On top of that, Barish noted the stock trades at a premium relative to peers. Starbucks trades at around 38 times forward earnings, while the analyst pointed out that rivals on average sport an average multiple of 24. “With low near- and medium-term visibility, we find the current valuation unwarranted,” he said. Investors will get a sense of what’s next for Starbucks later this month, when the company reports fiscal third-quarter results. Shares fell more than 1% in the premarket following the downgrade. Starbucks did not immediately respond to CNBC’s request for comment.
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